Labor has warned the government that new subsidies for coal as part of any internal settlement on the national energy guarantee will scuttle the chances of securing peace after 10 years of warring over climate and energy policy.

The shadow climate change minister, Mark Butler, told Guardian Australia that the construction of any new coal-fired power stations “will paralyse Australia’s transition to clean energy” and “run against all the advice of industry and business, including Snowy Hydro”.

“Any subsidy for new coal in the Neg will destroy any chance of the government attracting broad support for its policy,” Butler said.

The warning comes as the energy minister, Josh Frydenberg, on Tuesday cleared the decks to take the Neg to a critical meeting of state and territory energy ministers in August, but despite the victory, he still faces a noisy internal campaign to give coal a fillip.

The Nationals are split over the policy, with some favouring the bankrolling of a new fund to prolong the life of coal plants, or a research fund. One of the dissident Liberals, Eric Abetz, declared after party-room meetings on Tuesday that the “landing” of the Neg would have to involve either the retrofitting of coal plants “or building a new one”.

In response to questions in parliament from Labor on Tuesday, the prime minister, Malcolm Turnbull, said coal had an important role to play in the energy mix “possibly forever, who can tell?”

Frydenberg faces a series of hurdles in landing the Neg. Despite internal pushback, the energy minister has now succeeded in taking the Neg to the Council of Australian Governments’ energy council without it being subjected to another special meeting of government MPs, which was the objective of the former prime minister Tony Abbott.

The energy minister will meet his state and territory counterparts in early August. Any one of the states or territories could scuttle the Neg, because adopting it requires consensus across all the participants in the national energy market.

The Australian Capital Territory has already warned that it will be difficult to sign up because of the lack of ambition in the scheme’s emissions reduction target. After positive comments about coal in recent days from Frydenberg, the territory’s climate minister, Shane Rattenbury, also warned the commonwealth to tread carefully.

Rattenbury said coal was done. “Electricity prices are already high, and consumers will only bear further costs unless the Coalition embraces the modern age of cheap, reliable, renewable energy,” he said.

“The era of coal is over. We need to phase out this technology if we’re to have any chance of a decent future for energy and the environment in Australia.”

Victoria’s climate change minister Lily D’Ambrosio also expressed concern about the positive tilt on coal. “Along with the unnecessary complexity of the Neg, the Coalition is now threatening to slug consumers with the additional costs of un-bankable coal-fired plants just to keep their divided party room together”.

If Frydenberg can ultimately secure the support of the states, and then steer the required legislation back through the Coalition party room in defiance of internal critics, he will need Labor’s support to get the proposal through the parliament.

Many stakeholders are pressuring the major parties to strike a deal on the policy mechanism to end the uncertainty that has plagued the energy sector during the decade-long climate wars.

Apart from the stakeholder push to make any settlement bipartisan, it is unlikely the government would have a viable alternative pathway in terms of numbers to get the Neg legislation through the parliament in the absence of bipartisan support, given that there is the risk of government MPs crossing the floor.

The signals from Labor have been more positive than negative, but Butler has been warning consistently that the ALP won’t sign up if it can’t scale up the target for emissions reduction in the scheme in the event it wins government at the next election.

As the internal Coalition tensions have mounted as the policy enters its decisive phase, Labor has also declined to give Frydenberg political cover to land the scheme.