Putting in energy-efficient light bulbs and cutting gas in coalmines could be eligible for taxpayer funding under the federal government's climate policy.
There could also be scope for international carbon emission permits to be counted, despite the government saying they wouldn't be part of its emissions cuts.
Environment Minister Greg Hunt released draft legislation on Friday for the emissions reduction fund, which will replace Labor's carbon tax and carbon farming initiative.
Both major parties are committed to cutting carbon emissions by five per cent below 2000 levels by 2020.
Improving the energy efficiency of homes and factories, capturing landfill and mine gas, improving farm soil and upgrading vehicles will qualify for funding.
Those seeking funding, for projects lasting up to 15 years, will need to pass a new "fit and proper person" test.
And any project for which funding is sought would have to be something not likely to have occurred "under normal business conditions".
The Clean Energy Regulator (CER) would be responsible for registering projects and issuing Australian carbon credit units for verified emissions reductions.
The CER would buy emissions reductions at the lowest available cost, generally through reverse auctions.
The draft bill does not set out the rules for a new safeguard mechanism, which would ensure emissions reductions paid for by the fund were not displaced by a rise in emissions elsewhere.
The safeguard, due to start on July 1, 2015, will be the subject of a separate bill.
Climate Institute chief John Connor said the draft laws were well short of a credible alternative to the current carbon pricing scheme.
The policy could put Australian emissions on track to rise by 30 per cent by 2030, he said.
Mr Connor said the draft laws left the door open for the purchase of international permits.
The CER's new powers would enable it to use almost any process it wanted to buy emissions reduction, undermining the claim to be a market mechanism.
"This draft legislation is still well short of a package that can credibly reduce pollution, let alone reduce pollution enough to help avoid costly climate disruption," Mr Connor said.
"Parliament should instead stay with the current laws, which price and limit pollution and can reduce emissions by up to 25 per cent by 2020 with deeper reductions thereafter."
Submissions on the emissions reduction fund draft bill close on May 23.
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