But conservation groups and the opposition say it will be a waste of the public's cash.

Money from the $2.55 billion emissions reduction fund - which will pay companies to develop carbon abatement projects - will start flowing after an auction process in the first quarter of 2015.

Environment Minister Greg Hunt says the level of interest and the pipeline of projects have been greater than expected.

"So my message to business, to farmers and households is very clear: the emissions reduction fund is open for business," he told Sky News on Sunday.

The government is adamant the scheme - which passed parliament last week with the support of the Palmer United Party and crossbench senators - will work despite doubts raised by independent analysts.

It is confident funding projects that clean up power stations, improve energy efficiency or plant many trees will help reach the five per cent emissions reduction target by 2020.

Prime Minister Tony Abbott says it is a "smarter" and more effective way of dealing with climate change.

"We envisage that they will involve more trees, better soils and smarter technology," he told reporters in Bunbury, WA, on Sunday.

Labor's environment spokesman Mark Butler labelled Direct Action a "colossal waste of taxpayer funds".

It would only achieve about a quarter of the emission reductions needed to meet the five per cent target, he said.

"Tony Abbott and Greg Hunt stand up, put their hands on their hearts and say `We are going to achieve the five per cent reduction'," Mr Butler said.

"No one else believes it."

The Australian Conservation Foundation warned companies could be getting money for projects they were already planning to do.

ACF president Geoff Cousins branded it a "Mickey Mouse" plan that did nothing to compel polluters to cut emissions.

But Mr Hunt said safeguard mechanisms in the scheme would act as an "important guideline" against rogue emitters.

From mid-2016, companies could be forced to pay a fine if their emissions continued to rise.