The Abbott government does not believe it will ever need to penalise firms for going rogue and increasing their carbon emissions under its direct action climate policy.
The coalition has struck a deal with the Palmer United Party to secure crucial Senate votes for the $2.55 billion plan.
Environment Minister Greg Hunt says a safeguard mechanism will be in place from mid 2016 to ensure big businesses don't become "rogue emitters".
But he doesn't believe the mechanism will be needed.
"Is there likely to be any revenue raised? Our intention is no, our budgeting is no, and that's because we think the firms will operate within it," Mr Hunt told Sky News on Thursday.
Mr Hunt believes the incentives to reduce emissions with practical projects will be enough to achieve a five per cent cut.
Direct action will pass the Senate with the support of four PUP-aligned senators, as well as independents Nick Xenophon and John Madigan.
The government secured PUP's votes by agreeing to Clive Palmer's demand for a new investigation into an emissions trading scheme.
But Mr Hunt says no matter what the investigation comes up with, the coalition will not return to a carbon price.
"Not coming back under us in any way, shape or form, at any time. Anybody who has reported that is categorically wrong."
The Greens believe the government's policy, which involves big polluters voluntarily opting in, is a joke and will not reduce pollution.
Greens leader Christine Milne called the policy a shocking outcome for the environment, and dismissed the penalty threat as a fig leaf.
"The fact is the (penalties) will never bite," she told ABC radio.
"If it does it's a carbon tax and the prime minister couldn't live with that."
Labor said there was "no way" direct action would deliver the five per cent reductions by 2020 because there was no cap on pollution.
"Pollution becomes unlimited, and added to that the big polluters are the ones who get the money," Labor frontbencher Tony Burke told Sky News.
"It is a system that does nothing other than pay the worst offenders."
Mr Burke said the policy was not only environmentally reckless, but a waste of $2.55 billion.
He also questioned why there was a need for the Climate Change Authority inquiry into an emissions trading scheme.
"How many reports do we need on this issue?" Mr Burke asked.
"No amount of report, logic, science, analysis changes the fact that this is a government that's willing to be irresponsible on the environment, and irresponsible on the budget."
Labor frontbencher Mark Butler said direct action was "utterly hopeless" and likened it to a project a teenager could have thought up.
"This is an assignment, frankly, you could have given a first-year high school student with access to the internet," Mr Butler reporters in Canberra.
He said Mr Abbott would go to November's G20 leaders summit in Brisbane with nothing to show in regards to climate change action.
"Countries like the Uniter States, China and many others have serious plans to tackle climate change," Mr Butler said.
"The deal done yesterday ... has left Australia completely empty-handed."
Fellow Labor MP Jim Chalmers said Prime Minister Tony Abbott had become "a wholly owned subsidiary of Clive Palmer".
