A company called ZeroGen wants to build a coal-fired power plant that will bury most of its emissions underground, using Carbon Capture and Storage (CCS) technology.
But ZeroGen's demonstration plant, planned for central Queensland in 2012, could be in trouble.
The company has written to the Federal Government saying emissions trading will pose a "barrier'' to the development of CCS.
The letter says the scheme is too soft, so the incentive to invest in CCS is not strong enough.
"Australia's 5 per cent carbon reduction target accompanied by a weak carbon price will be nowhere near sufficient to generate the scale of investment needed to make clean coal technologies economically viable,'' the letter says.
The company also wants to be allowed to pump carbon emissions into the air for free.
Under the Government's plan for emissions trading, due to start next year, a coal-fired power plant using CCS won't have to pay for emissions buried underground.
ZeroGen says its demonstration plant is high-risk and expensive, so it shouldn't have to buy permits at all.
"The Rudd Labor Government's promises to support clean coal technology have been exposed as a sham,'' Mr Turnbull said.
"Australia is the world's largest coal exporter and there is therefore no single low-emission technology of more importance to Australia than Carbon Capture and Storage.''
The Opposition would not be drawn on what the Government should do to boost CCS.
A spokesman for federal Energy Minister Martin Ferguson said ZeroGen could apply for $500m in Government funding for CCS.
He did not comment further on ZeroGen's concerns.
Last year, Queensland Premier Anna Bligh provided $100m for ZeroGen's feasibility study.
The Australian Coal Association kicked in the remaining $25m for the study, which is expected to be finished this year.
Read Full From Source news.com.au
