Energy Minister Angus Taylor has likened a business-led proposal to tighten emissions obligations on polluters to a "backdoor carbon tax".
In a signal to the Nationals, who are yet to agree to stronger emissions cuts ahead of COP26 climate talks in Glasgow, Mr Taylor stressed net zero emissions does not mean stopping all emissions.
"Some in this debate think net zero means zero. It doesn't. Zero is not zero," he told an energy and climate summit hosted by the Australian Financial Review on Monday.
"For a country like Australia, this is the difference between destroying some of our greatest economic strengths versus defending and strengthening those industries."
The minister indicated the federal government was not interested in tightening Australia's climate safeguard mechanism which obliges entities to avoid excessive emissions.
It applies to facilities with direct emissions of more than 100,000 tonnes of carbon dioxide equivalence a year.
The Business Council of Australia called for the threshold to be lowered to 25,000 tonnes of carbon dioxide equivalent to send a strong investment signal.
Mr Taylor wanted to avoid "explicit carbon taxes or backdoor pathways to a carbon tax".
"A substantial tightening of the safeguard mechanism is a backdoor carbon tax consumers will ultimately have to pay for and that's not acceptable to government," he said.
NSW Treasurer Matt Kean urged political leaders to look at the cost of not taking action on climate change.
"There are huge opportunities that are emerging. We can't miss out on that. The last thing we want to say is Australia to be a rust bucket state," he told the summit.
"We've got everything to gain by the world decarbonising. We should be getting ahead of the curve."
A survey of more than 400 people including business figures by the Carbon Market Institute shows 84 per cent support a 50 per cent reduction of emissions on 2005 by 2030.
The government's current target is a reduction in emissions to 26 to 28 per cent below 2005 levels by 2030.
The survey also found nearly 80 per cent want pollution limits via the safeguard mechanism reduced.
Australian Associated Press