The $2.55 billion Emission Reduction Fund (ERF) – which may swell to almost $5 billion by 2030 – will likely deliver about 355 million tonnes of carbon abatement, based on the price paid in the fund's first auction, the group said in a report.

Prime Minister Malcolm Turnbull has maintained the climate goals of his predecessor Tony Abbott. These project a 5 per cent fall in Australia's 2000 emissions by 2020 and about 19 per cent out to 2030.

Based on government projections, the goals imply Australia will need to cut emissions by a cumulative total between 2015 and 2030 of 2.5 billion tonnes – or about seven times the ERF's likely abatement, The Climate Institute said.

A test of the analysis will come on Thursday when the government will releases results of its second ERF auction. Also known as its Direct Action policy, the government has so far paid $660 million – or $13.95 per tonne – to farmers, landfill operators and other projects to eliminate 47 million tonnes of carbon.

Market analyst RepuTex predicts as many as 384 projects will bid for funds in the second round with the possibility of a lower per-tonne price and a large sum being spent.

Environment Minister Greg Hunt said in April the first auction "clearly prove[s] that the Coalition's climate change policy is delivering real and significant abatement – just as we always said it would".

A spokesman for Mr Hunt said there is "no doubt that the ERF is incredibly effective".

"The results speak for themselves," he said. "Our system is delivering massive emissions reductions."

"We welcome the fact that the Climate Institute – an organisation that for a long time has been highly critical of the ERF and a supporter of a carbon tax/emissions trading system – is now finally beginning to acknowledge some of the 'important strengths' of the [fund]," the spokesman said.

Temperatures rise

The Climate Institute said Australia's post-2020 targets should be much higher if nations are to keep global warming to within 2 degrees of pre-industrial limits.

The UK's Met Office said on Monday that the mean global temperature in the first nine months of 2015 was 1.02 degrees above the 1850-1900 average – passing the symbolic 1-degree milestone for the first time.

"We've probably got 1.5 degrees [of warming] locked in," John Connor, chairman of the Climate Institute, said.

A fairer target for Australia would be to aim for 4.7 billion tonnes of abatement by 2030, of which the ERF would deliver just 7.5 per cent, the Climate Institute said.

The current target may itself be hard to keep because the government is relying on payments to polluters or those storing carbon with little restraint on the rest of the economy to curb emissions, Mr Connor said: "We are not sending a broad-based signal to emitters in the economy that they have to take responsibility".

Emissions 'going the wrong way'

Mark Butler, the Opposition spokesman for climate change, said Direct Action would probably perform even worse than The Climate Institute predicts.

Almost three-quarters of the first auction went to existing projects, some as much as 10 years old, Mr Butler said, citing the Clean Energy Regulator.

"They were simply handing over money to projects that were already in the system, and were already delivering abatement that had been counted," Mr Butler said.

"Every piece of analysis I've seen says that Direct Action will not even constrain emissions, let alone reduce them," he said. "Emissions are actually going the wrong way."

Greens deputy leader Larissa Waters said weak baseline rules meant most big polluters would find ways to increase emissions without penalty.

"The so-called safeguard mechanism, which is meant to cap pollution, is set so high that it is meaningless – it is only safeguarding the Liberal party's big mining donors," Senator Waters said.

The Climate Institute report said Direct Action had its uses but only "as a buttress not a pillar" of climate action. Other policies could include allowing companies to trade pollution permits between them – effectively setting up a carbon price – as well as stricter vehicle fuel efficiency standards.

The Greens have legislation before parliament to raise car standards "so there is no need for the delay to 2017 for the government to merely consider this – these standards can be implemented immediately", Senator Waters said.