The Morrison government has held out the prospect of government support for new coal-fired power stations “where they meet all the requirements” of yet-to-be determined mechanisms to boost investment in new electricity generation.

Scott Morrison and the energy minister, Angus Taylor, on Tuesday flagged a range of policy interventions to boost investment in new “reliable” power generation, including providing a floor price, contracts for difference, cap and floor contracts and government loans.

Morrison has dumped the emissions reduction target for the electricity sector set by the national energy guarantee, and on Tuesday flagged possible new coal investment, but the prime minister continued to claim Australia would meet its commitments under the Paris climate agreement.

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With the government suffering a thumping backlash in the weekend Wentworth byelection, and exit polls showing climate change was a significant issue influencing votes in the contest, Morrison held open the prospect of topping up the emissions reduction fund (ERF) – a vestige of Tony Abbott’s Direct Action policy, where taxpayers pay farmers and businesses to cut carbon dioxide emissions.

The government declined to top up the ERF in the May budget when Morrison was treasurer, but on Monday he said: “I’ve never ruled that out – I’ve always said that would be dealt with through the normal budgetary process”.

The new investment mechanism draws on an idea from the Australian Competition and Consumer Commission in a recent landmark review of the electricity market – but the specifics depart from what the consumer watchdog recommended.

The ACCC suggested an underwriting mechanism where the government would enter low fixed-price energy offtake agreements, set at $45-$50 per MWh, and it made it clear it did not see the recommendation as a lifeline for coal.

The government is now proposing a series of different interventions to attract new investment in firm or firmed generation capacity with a view to increasing competition and lowering electricity prices.

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It says the mechanisms might include providing a floor price, offering contracts for difference, cap and floor contracts, or government loans. It says the criteria for determining which projects to support will include enhancing competition, the impact on electricity prices, and the impact on reliability and security of interconnected electricity networks.

With the government on the clock with an election looming, it wants to cook up the new mechanisms in three weeks and release program guidelines so expressions of interest can take place over December and January.

Morrison told reporters the investment mechanisms would be technology neutral, but when asked about an ongoing push by the Nationals for new coal-fired power stations, he said they could be part of the mix “where it stacks up” and “where it meets all the requirements”.

“We’re for lower electricity prices and for people generating more reliable power in Australia,” the prime minister said. “We don’t take positions on the source of the fuel.”

Taylor sidestepped a question about whether the government intended to bankroll new coal projects, and also indemnify them from future carbon risk, which would expose taxpayers to more financial risk.

“What’s crucial is we ensure that new capacity can come into the market at a cost that will be affordable for Australians and Australian businesses, and that means making sure that government carries as little risk as is necessary but as much as we need to, to make sure we get reliable power into the system,” Taylor said.

The shadow climate change minister, Mark Butler, fired a warning shot on any new coal investment. “There is no appetite for coal-fired power in this country, and putting hundreds of millions of taxpayer money towards that is something we oppose strongly,” he said.

Morrison also attempted to put Australia’s power companies on notice to lower power prices by 1 January, which would see consumers feel some hip-pocket relief before the election.

He reiterated the government was prepared to use “the big stick” of breaking up power companies that refused to pass through reductions in wholesale electricity prices.

While it is unclear how that could be executed, Morrison declared he wasn’t bluffing: “People can make many criticisms of me – and they do regularly, that’s fine – but they never accuse me of bluffing and I don’t bluff when it comes to these issues”.

The government has asked the Australian Energy Regulator (AER) to introduce a default market offer for energy prices for households and small businesses, and the introduction of a reference bill for each region – two other things proposed by the ACCC to lower power prices.

While Morrison is demanding power price relief before January, the new system of default offers and reference bills will come into effect on 1 July – likely on the other side of the next federal election.

Energy retailers reacted coolly to Tuesday’s announcements. The Australian Energy Council, which represents 22 major electricity and gas companies, said the best way to get a cheaper power deal was to shop around, not government price regulation.