The federal fund set up to fight climate change and reduce Australia's carbon emissions could be used to help extend the life of coal-fired power stations — an idea labelled "insane" by one expert.

Key points: The Emissions Reduction Fund is under review and one idea being considered is whether the public funds should be given to coal-fired power generators

The Emissions Reduction Fund is under review and one idea being considered is whether the public funds should be given to coal-fired power generators The chair of the review committee says projects awarded funds should achieve "real and genuine abatement"

The chair of the review committee says projects awarded funds should achieve "real and genuine abatement" One expert said the idea coal-fired power plants would qualify for taxpayer-funded carbon credits was "insane"

The independent committee overseeing the Emissions Reduction Fund (ERF) is considering the idea as part of a review into the Federal Government program.

The ERF helps pay for projects, including tree planting and installing energy-efficient appliances, to help Australia meet its global reduction targets.

As part of the review, the independent Emissions Reduction Assurance Committee (ERAC) is considering whether changes are needed to how projects are assessed and which qualify for taxpayer-funded carbon credits — the assessment style is called 'the facilities method'.

Specifically, the review is looking at power generation projects, including, but not limited to, coal.

The chairman of the ERAC, Professor Andrew Macintosh from Australian National University, said the review would not automatically disqualify fossil fuels like coal or gas.

He said he believed it was important the ERF encouraged all projects that helped lower Australia's carbon emissions.

Projects granted funding under the scheme are meant to be new ones that would not have happened without government assistance.

"From the top of my head, I can conceive a circumstance where activities in coal-fired power plants, or gas-fired power plants, or other generators, could be additional and have environmental integrity, and I can see hypotheticals for where they wouldn't be," he said.

"We've got to evaluate both those circumstances, where they would and they wouldn't, and make sure that the rules in the method ensure that we only capture the circumstances where the activities will result in real and genuine abatement."

However, there are real concerns that if the method and the rules surrounding it are expanded, the taxpayer funds could help extend the life of heavy-polluting fossil fuel power generators.

"Obviously, there is a risk that if you provide subsidies for generators, you could extend their operating life, and in doing so you can displace less emissions-intensive activities," Professor Macintosh said.

"The method was designed with that risk in mind, and it is one of the key things we will be looking at as part of the review."

ERF expert Tim Baxter, a fellow of Melbourne Law School and associate of the Climate and Energy College, said the potential inclusion of coal-fired power stations was worrying.

"We're asking whether a scheme, designed purportedly to reduce Australia's emissions, should be funding some of the most polluting sources of electricity generation in the country," he said.

"This is an insane question to ask."

Coal baron wanted ERF money for turbine

Earlier this year, the ABC reported the office of then-environment minister Melissa Price was approached on behalf of coal baron Trevor St Baker.

He heads up Delta Energy, which wanted carbon credits through the ERF to pay for the replacement of turbine blades at the company's Vales Point coal station.

Trevor St Baker's company Delta bought Vales Point power plant for $1 million. ( AAP: Patrick Hamilton )

That proposal was rejected by the Clean Energy Regulator. The company then lobbied the Government for help.

Emails obtained by the ABC at the time show the minister was not in a position to direct the regulator on individual matters, but that she would ask the ERAC to carry out a review to look at ways coal-fired power stations could earn credits through the ERF.

Vales Point power plant was sold to Delta in 2015 by the NSW Government for $1 million. Two years later the asset was valued at $750 million, though that figure would only stand if the facility can keep operating.

Mr St Baker is a political donor to the two major parties.

Professor Macintosh insists there was no political pressure applied to the committee.

"The committee made a decision prior to any of those activities to review the method," he said.

"I should also note that even if it that was true — that the committee's review was prompted by lobbying — I personally wouldn't say that's a great concern because the legislation allows for the minister to request the committee to undertake reviews and give advice.

"And if there's a stakeholder who believes, genuinely, that there are activities that they would undertake with incentives provided by the ERF and they're currently blocked, then I don't see it as a great thing for the minister to raise that with the committee.

"The committee has been put together to provide advice on just these sorts of things."

Then-environment minister Melissa Price asked for a review into the ERF methodology. ( AAP: Lukas Coch )

Mr Baxter is not convinced the committee will end up recommending the changes being considered.

"I don't think that there's a principled reason for this method to exist at all, and if there is a reason for it, I don't think there's a principled reason to expand its availability," he said.

Typically, the committee takes around nine months to consider public submissions and provide its recommendations to the Federal Minister for Energy and Emissions Reduction Angus Taylor.

However, Mr Taylor is not compelled to follow that advice and could introduce whatever changes he deems appropriate.

In a statement, Mr Taylor said the "Government's Climate Solutions Package (CSP) was a $3.5 billion investment which maps out how we will achieve 328 million tonnes of abatement needed to meet our 2030 target".

"Building on existing measures, the CSP includes a further $2 billion for the ERF, which has already contracted around 193 million tonnes of abatement at an average price of around $13 per tonne.

"Through the ERF, Australia is investing in farmers to help them revegetate degraded land, working with businesses to invest in the adoption of energy efficient business practices and with Indigenous communities in projects involving traditional land care such as savannah burning."

ERF funding coal would be 'global embarrassment'

In a written statement, the Environment Department said the committee's consultation paper was intended to seek feedback from stakeholders into the review and should not be interpreted as predetermining the outcomes of the review.

"After the committee completes its review later in 2019, the Minister for Energy and Emissions Reduction will consider the committee's recommendations, such as whether to vary the facilities method," the department wrote.

The chief of the Australian Conservation Foundation, Kelly O'Shanassy, said she believed expanding the scheme to include the fossil fuel energy sector would be a mistake.

"We would be the only country in the world to be using a climate fund to fund coal-fired power, and that would just be a global embarrassment," she said.

"We would expect that the committee remains quite clear and quite strong that this is an emissions reduction fund and that funding coal-fired power stations does not fit into the logic of that. I hope that's what happens.

"We'll certainly be watching it very closely and contributing to the review to make sure that that's the outcome."

Submissions close on July 12.