A new report from the Australia Institute has found evidence the scheme facilitates increased carbon admissions with no evidence that carbon capture and storage methods have integrity.

This comes as the initiative faces increased scrutiny, with allegations of serious mismanagement and claims millions of taxpayers' dollars have been paid out with no benefit to the environment.

The report found that more than half of the $4.5 billion fund has already been committed to purchase 217 million tonnes of carbon credits since 2015, less than half of Australia's annual emissions.

Australia Institute executive director Ben Oquist said that while carbon credits with integrity had a role to play, "dodgy credits used as offsets are effectively a licence to pollute, fuelling climate change".

"Australia's only legislated climate policy, the controversial $4.5 billion dollar Emission Reduction Fund, is being undermined by poor regulation and the influence of industry," he said.

"Instead of using public money to cut pollution, the Emissions Reduction Fund has become a ready source of affordable, low-quality offsets for high-polluting industries. Now is the time to correct this decline.

"We need an urgent review of climate policy in Australia to restore integrity to the Emissions Reduction Fund, otherwise we risk wasting billions more of taxpayer dollars on hot air - that is, useless credits that don't lower emissions."

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In late March, ANU Professor Andrew Macintosh called for the appointment of an independent body to decide who buys credits after the publication of a series of papers outlining systemic flaws in the fund.

The professor claimed he found serious integrity issues with the major methods approved by the government to create carbon credits.

In early April, Energy and Emissions Reduction Minister Angus Taylor said the criticisms were part of a political attack on the industry.

"These criticisms are completely unfounded," he said.

He said the Clean Energy Regulator and Emissions Reduction Assurance Committee had already looked into a first round of claims made by Professor Macintosh and lobby groups including the Australian Conservation Foundation last year, and found they did not stand up.

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