Federal MP Clive Palmer has strongly indicated his party won't support the Abbott government's climate change direct action plan, labelling it a "token gesture" and a waste of money.
The Palmer United Party leader and mining magnate said the money allocated for the policy should be used for pensions, which could be under review in the May budget.
Mr Palmer said the rights of pensioners were more important and had greater priority than "a token gesture to addressing carbon issues".
"On one hand the government makes broken promises, yet on the other hand they commit to campaigns that waste money like direct action," Mr Palmer said in a statement on Monday.
"It would take some convincing for us to support a bill such as this."
This throws up a major hurdle for the government, which will need the support of PUP in the new Senate come July to repeal the carbon tax and get its alternative policy across the line.
Two PUP senators - Queensland's Glenn Lazarus and Tasmania's Jacqui Lambie - will make their political debut in the next Senate, with Dio Wang also expected to take a seat once the vote count in West Australia's by-election is finalised.
The government will need the votes of at least six crossbench senators to get its legislation passed.
But the Federal Environment Minister, Greg Hunt, has told the ABC he remains confident that political support will be found for the plan.
"We will work constructively with them from the cross benches and we would still say to the Labor party as well as to all of the cross bench senators, the Australian people spoke and they spoke with a clear strong voice," he said.
"Repeal the carbon tax, take practical action on climate change, keep the compensation and those three pillars were the three pillars we took to the election, and we have never deviated and never wavered."
Mr Palmer is an outspoken critic of the carbon tax, and has been pushing for its repeal to be made retrospective so payments made under the scheme can be refunded.
He abstained from voting on the repeal legislation in the lower house, which if passed by the Senate will save his resource companies millions of dollars a year.
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