Instead of placing a tax on carbon, Mr Abbott’s climate plan would provide financial incentives to businesses to reduce emissions below business-as-usual levels.

Businesses would be able to on-sell carbon abatement to the Government, which would be funded by a newly established Emissions Reduction Fund. Businesses that increase emissions levels would incur a financial penalty.

Mr Abbott claims that his policy would not be funded through any new taxes or increased taxes, and that it would cost $36.8 billion less than the projected $40 billion for the CPRS.

The fund would use the existing National Greenhouse and Energy Reporting Scheme (NGERS) to determine the abatement achieved by individual businesses. An expert body would be established to assess tenders and make recommendations on activities to be supported by the fund.

Small businesses and other entities not covered by NGERS will be able to participate through an opt-in basis.

The fund would commence between 2011 and 2012 and would aim to reduce emissions levels by five per cent by 2020.

In response to the Coalition's announcement, The Climate Institute has said that while there are some positives in the proposal, it is a high-risk strategy with no long term plans beyond 2020.

“There is no absolute cap, or limit, on emissions and no guarantee that big polluters will clean up their act as there is no disincentive to pollute, which makes it fundamentally flawed," said Climate Institute CEO John Connor.

"The fact is that Australia has one of the most energy inefficient, polluting economies and in a world turning to clean energy, our competitors among China, India and Europe are leaving us behind in clean energy investments, jobs and industries," added Mr Connor.

In addition to the measures outlined above, the Coalition proposes to:

• Provide $60 million to develop the La Trobe Valley, Hunter and Central Queensland regions as clean energy employment hubs
• Consider tenders for further emissions reducing projects under the Emissions Reduction Fund, such as forestry abatement, waste coal mine gas to electricity generation, energy efficient building projects, innovative landfill management, composting and recycling
• Provide a $1,000 rebate for either solar panels or solar hot water systems in addition to existing rebates. These would be capped at 100,000 rebates per year, with the goal of achieving one million additional solar energy roofs on homes by 2020.
• Allocate $100 million to a Solar Towns and Solar Schools Initiative which would provide grants for towns, non-capital cities and schools to access direct solar energy for onsite use and return to the power grid
• Commit to the planting of an additional 20 million trees by 2020 to re-establish urban forests and green corridors.

The Greens have recently released their own alternative climate change policy, which Senator Christine Milne is discussing with Minister for Climate Change Penny Wong.