The government's Climate Change Authority has questioned the efficiency and effectiveness of the Emissions Reduction Fund, the centre piece of the Coalition's controversial "Direct Action" climate policy, and says the scheme is unlikely to deliver on long-standing emissions reduction targets.

The authority, charged with providing independent advice on climate-change policy, warned the Emissions Reduction Fund (ERF) risked paying large amounts to polluters for emission reductions that would have happened anyway.

It also said the ERF alone is unlikely to deliver the promised 5 per cent reduction in emissions by 2020. The authority has also recommended against changing the Large-scale Renewable Energy Target which covers wind and other big generators. This contradicts the advice of a hand-picked government review panel, chaired by businessman Dick Warburton, which recently called for the target to be dramatically scaled back.

On Monday the authority released a review of the Carbon Farming Initiative (CFI) which was last month expanded to become the Emissions Reduction Fund (ERF). Participants in the CFI were rolled into the new fund which now covers all sectors of the economy. Under the ERF the government will spend $2.55 billion to purchase emissions reductions through auctions. The authority said the ERF "has become the spearhead of the government's climate change policy."