Proposed safeguards to limit greenhouse gas emissions from big polluters have been designed by the Abbott government to fail, according to the Grattan Institute.
And an analysis by Environment Victoria has found the way Australia's heavy emitting electricity industry is treated under the safeguards would allow power plants to increase emissions by millions of tonnes without being penalised.
In a submission on the government's proposed safeguard design under its climate change plan - known as direct action - the Grattan Institute says the mechanism will not stop emissions increases by heavy industry "because it is not designed to achieve this goal".
The government published in March its draft safeguards scheme for the $2.55 billion climate plan, which also pays polluters to reduce emissions.
Environment groups said at the time that the proposal was lenient to Australia's heaviest polluters because baselines for pollution would be set at the highest point during the five years from 2009 to 2014 and there was too much flexibility for big companies to increase their emissions.
The Grattan Institute says in its submission that the safeguards mechanism "sacrifices environmental integrity in order to avoid imposing immediate cost impacts on emitting facilities. In the short term this is disappointing; in the long term it is unacceptable."
"As a result, its impact on reducing emissions is likely to be zero," the submission says.
It recommends the government set strong financial penalties that will deter polluters from increasing their emissions. The government says the scheme will be revenue neutral, signalling that such fines are unlikely.
The Grattan Institute also criticises special treatment for the electricity industry, which would be subject to a baseline for the whole industry rather than individual companies, saying instead an entirely separate scheme be adopted that mandates an emissions baseline for plants and requires them to trade credits if they exceed it.
The institute's energy program head Tony Wood said he believed the government had deliberately designed its scheme to allow big polluters to keep increasing their emissions.
"It's very clear to me that is exactly what they've done," he said.
The analysis by Environment Victoria found under the proposed electricity industry rules emissions from power plants could be allowed to rise 17 million tonnes from current rates without triggering penalties.
If that limit was breached, the government proposes that each power plant is then set a baseline individually. If that occurred Environment Victoria found emissions could be allowed to rise as much as 110 million tonnes, though its submission says the more likely outcome is a rise of 40-50 million tonnes.
Nicholas Aberle from Environment Victoria said recent trends were showing power industry emissions rising again, highlight the need for effective safeguards.
"The only thing that this proposed mechanism safeguards is a continued free ride for polluting coal-fired power stations," he said.
In a separate submission, the Australian Industry Group said the design of the safeguards ensured they would not be the driver of greenhouse gas cuts for Australia's 2020 target.
"By the same token, if the other elements of the Government's policy suite do not perform as expected the mechanism will not ensure that the 2020 target is achieved," it says.
A spokesman for Environment Minister Greg Hunt welcomed safeguard submissions "as part of the consultation process to help ensure the policy is as robust as possible".
The government had its first auctions under direct action last month, spending $660 million on 144 projects, mostly in the landfill and forestry sector.
The money spent is a quarter of the government's budget and it is expected to achieve about 15 per cent of the greenhouse cuts necessary to reach Australia's 5 per cent emissions reduction target on 2000 levels by 2020.
