Clive Palmer is threatening to block both the carbon and mining tax repeals if the Abbott government “plays games” by including its Direct Action climate change fund in budget appropriation bills to avoid its defeat in the Senate.



And the mining magnate-politician challenged Tony Abbott to hold a double dissolution election if he didn’t like the stance the Palmer United party was taking on key issues, claiming such a poll would only enhance his party’s position.

On Monday Palmer hardened his already unenthusiastic position on the government’s $1.5bn “emissions reduction fund” – the centrepiece of Direct Action – saying it was “dead”, “finished” and “over” because Palmer United party senators believed the money would be better spent on pensions.

The environment minister, Greg Hunt, responded by repeating a tactic the government foreshadowed last year – that the money for the emissions reduction fund could be included in the budget appropriations bills which cannot be amended in the Senate.

"The funds will be part of the budget papers and I doubt the budget will be blocked, unless we're going to be forced into a constitutional issue," Hunt told the ABC.

Palmer responded by saying that “if the government wants to try to play smart … then two can play at that game”.

“You tell them that if they do that [include the emissions reduction fund in the budget] we will immediately reconsider our position on the carbon and mining tax repeals,” Palmer told Guardian Australia.

“If they play games like that they need to be politically punished … and reconsidering our support for the carbon and mining tax repeal would be one thing we would definitely consider.”

Palmer said if Abbott “didn’t like that answer he could always have a double dissolution election … but of course then he would be going to the people on the basis of what he really wants to do to them, which will be revealed in the budget, and in a double dissolution election we would only need a quota of 7% rather than 14% so I think we would double our number of senators.

“But if Tony Abbott wants a double dissolution election he can have one, we’re fine with that.”

Speaking to reporters in Brisbane later in the day, Palmer claimed Direct Action was “a slush fund designed to give money to Liberal party consultants and lobbyists who want to do their bidding”.



“Direct Action has been made up so the Liberal party can confuse people in the green sector and make out they are doing something when they are doing nothing,” he said.



He repeated his threat to “reconsider” support for the mining and carbon taxes unless Direct Action was presented as a separate bill that could be voted down by the Senate, rather than as part of budget appropriation bills.



He said he was seeking to “protect” older Australians who Tony Abbott had promised would suffer no change to their pension rights.



“If he wants to do that to elderly citizens I will do whatever I can to protect our elderly citizens ... he knows he is lying to the Australian people,” Palmer said.



When it became clear last year that the Senate crossbench could vote against Direct Action, Hunt insisted there were “other options” open to the government, including linking the emissions reduction fund to a budget appropriations bill.

But climate policy advocates say implementing only the emissions reduction fund and not the broader compliance proposal under Direct Action, which would impose “baselines” on greenhouse emissions, would leave the policy even less effective than they now assess it to be.

“There is a real threat to any target if there is no compliance mechanism controlling the significant blowout in emissions … it would leave this as a policy destined for ruin,” said John Connor, the chief executive of the Climate Institute.

The emissions reduction fund has also been rejected by the Family First senator-elect, Bob Day, as “a waste of money”.

And the spending has been questioned by the Liberal Democratic party senator-elect, David Leyonhjelm, who says "even if [the science of global warming] is eventually confirmed government spending in Australia will not make the slightest bit of difference" and the DLP senator, John Madigan, who has said he wonders “whether [the government] is just trying to look like they are trying to do something about global warming which they don’t really believe in”.

But the independent senator Nick Xenophon wants changes to toughen Direct Action to ensure it is effective, with measures such as stringent emissions baselines for big emitters, which some industry groups are resisting.

Tony Abbott has threatened a double dissolution election if the new Senate blocks key elements of his election agenda.



“If Labor doesn’t see the light in the next few months there is a new Senate coming in July and I am confident they will accept the government’s mandate and if not there are constitutional options open to us,” the prime minister said in an interview with the ABC last year to mark the government’s first 100 days in office.

Earlier on Tuesday Palmer said he would also be willing to vote against appropriation bills containing funding for the emissions reduction fund.

“We’ll be voting against Direct Action, whatever form it’s in,’’ he told the ABC.



Labor confirmed it was disinclined to support Direct Action, even if the carbon pricing scheme is repealed.



"Australia can’t afford to do nothing on pollution – but that’s exactly what Tony Abbott is doing," said the party's environment spokesman, Mark Butler.



"Tony Abbott is a prime minister who doesn’t believe climate change is real. Labor remains opposed to Direct Action, which doesn’t have a cap on pollution, and pays taxpayer dollars to the big polluters with no likelihood of any substantial reductions in carbon pollution."