After Labor declared on Tuesday that it would seek to block Capital Recycling Solutions' proposal if re-elected on October 17, the Liberals have now stated their opposition to the project.

"The Canberra Liberals have been consistently uncomfortable with this proposal and do not support it in its current form," a party spokeswoman said.

The Liberals hit out at the Barr government's handling of the proposal, saying it had essentially strung the company along for three years before pulling a "stunt" on the eve of an election.

Their claim has been echoed by the Fyshwick Business Association, whose president Rob Evans said Labor's stance was "sadly just an cynical election stunt" done in response to the Greens' call for a moratorium on approvals for waste projects in the suburb.

Criticism of the Labor government's approach came as correspondence revealed City Services Minister Chris Steel foreshadowed an intention to thwart the project on July 2 - the day before the ACT government accepted Capital Recycling Solutions' environmental impact statement.

That decision had raised the firm's hopes that its proposed waste processing plant could finally proceed, having already spent three years and more than $3 million fighting to get it off the ground.

Those aspirations have been all but dashed in the space of 48 hours this week.

Labor's concerns about the project include its economic viability, location, a fear that it could lead to an increase in stockpiling of rubbish and a belief that it jars with the government's climate action agenda.

But the Barr government's move has failed to appease the residents and businesses which have been campaigning against it.

Inner South Canberra Community Council chair Marea Fatseas said the decision to oppose Capital Recycling Solutions' proposal failed to address the broader issue of whether heavy industry should be part of Fyshwick's future - which her group doesn't think it should.

"We don't want decisions made on a project-by-project basis - we need a policy framework," Ms Fatseas said.

But Mr Steel said it would assess each project on its merit, after he was questioned on what Labor's new stance meant for the other other large recycling proposal planned for the suburb; Hi-Quality Group's proposed waste management hub on Tennant Street.

The proposal, which is undergoing an environmental impact assessment, would include a recycling plant and individual processing facilities for wood, soil and liquid waste.

"That proposal [Hi Quality] is going through an EIS process and the government will have its say through the EIS process. It's the appropriate process for environmental issues to be considered and we'll wait to see what the outcome is," Mr Steel said.

He reiterated that Hume was the preferred location for waste management centres.

Ms Fatseas said the council wanted the next ACT government to adopt a "bigger picture view" and produce a masterplan to guide Fyshwick's long-term future. That plan should support Fyshwick's standing as a hub for light industry and bulk retail, which would complement the planned residential developments on Dairy Road and Eastlake, she said.

Ms Fatseas supported the Greens' call for a moratorium on approvals for new waste projects until a number of reviews have been completed, including of planning rules in industrial zones. She was pleased the Greens, which are aiming to hold the balance of power in the next ACT Legislative Assembly, had supported the council's call for an air quality monitoring station to be set up in Fyshwick.

Mr Evans, who opposes the project, launched a scathing attack on Labor over its new position, and its treatment of Capital Recycling Solutions.

He cast doubt over whether a re-elected Barr government would follow through on its threat, saying Mr Gentleman could've torpedoed the project at any time using his "call-in powers".

"There's no certainty here for anyone," Mr Evans said.

"We don't agree with the [Fyshwick location], we think it should be in Hume, but we really feel for the proponent - they've been trying to get this up for three years, encouraged by the Labor government. It's a terrible message to send to business and it will undermine business confidence. Why would anyone invest in Canberra?

"Until the planning regime changes, we continue to face the threat of inappropriate large scale industrial waste facilities in Fyshwick."

While Tuesday marked the first time the Labor government had publicly expressed concern about the project, correspondence between senior government officials and between City Services Minister Chris Steel and Planning Minister Mick Gentleman reveal that doubts about the project have been held for a some time.

In a letter to chief planner Ben Ponton in May 2019, seen by The Canberra Times, ACT NoWaste's Michael Trushell detailed a range of concerns about the project, including the proponents' apparently "overconfident" estimates of how much waste would be diverted from landfill as a result of the plant.

Mr Trushell also criticised the company over how it responded to concerns the agency raised after the environmental impact statement was submitted. He said the amendments the company presented were "disorganised", which was concerning given they had had more four months to prepare them.

Correspondence between Mr Steel and Mr Gentleman showed doubts over the project had reached the highest levels of government earlier this year.

In a letter dated July 2, Mr Steel said his directorate had at least four areas of concern about Capital Recycling Solutions' proposal.

The four points were the exact same ones Labor used this week to justify its opposition to the project.

Mr Steel wrote in the letter that his directorate anticipated that it would raise the concerns once Capital Recycling's environmental impact statement had been accepted, and a development application had been submitted.

The environmental report was formally ticked off the next day.

The decision didn't mean the project had been approved, only that government officials believed they had enough information on the environmental implications to allow a development application to be lodged.

Capital Recycling Solutions' director Adam Perry welcomed the decision at that time, which he interpreted as a sign of confidence in his highly contentious project.

Mr Perry again declined to comment on Wednesday.