Biggest polluters can increase CO2: report

Only 30 of Australia's top 150 polluters will be forced to reduce carbon emissions under the Abbott government's climate change policy, new analysis shows.

The report by energy and emission market analysts Reputex also found not one of the nation's top 20 polluters would have to cut emissions under the scheme.

The government last year replaced Labor's carbon tax with its direct action policy, which pays polluters not to pollute out of a $2.55 billion kitty.

Part of the policy is a safeguard mechanism, which prohibits around 150 of the nation's largest polluters from producing emissions over a certain level and will come into effect in July 2016.

The government's proposed baseline for the mechanism uses the company's peak emissions from the past five years.

Reputex predicts under those baselines emissions would actually increase by up to 20 per cent.

It says the baselines will be largely ineffective, with the majority set so high companies won't exceed them even with increasing pollution.

The proposed plan also gives baseline concessions for new and expanding facilities and groups power companies in as a sector, with a joint ceiling for emissions also based on historical peaks.

"As currently proposed, the baseline methodology provides companies with a significant amount of headroom to grow their emissions before they exceed their baseline," Reputex executive director Hugh Grossman said.

The government in March published a consultation paper on the safeguard mechanism, which is designed to ensure any abatement purchased under the $2.55 billion policy isn't offset by big polluters.

In April, the first direct action reverse auction - where companies bid to get government funding to reduce emissions - spent $660 million on 47 million tonnes of abatement.