Plans for a Koala National Park won't be moved ahead by a state government unless it can be registered under a controversial carbon credit scheme.
The bill behind the scheme, dubbed the Improved Native Forest Management Method, faces an upcoming vote in the federal Senate, which has divided the Greens party room and sparked debate among environmental groups.
Formulated by the NSW government under Premier Chris Minns and backed by the federal government, the scheme allows states to earn millions of dollars by opting not to log public native forests that would otherwise be used for commercial forestry.
Carbon credit schemes have come under fire for allowing companies to pay to continue polluting in exchange for funding environmental projects elsewhere, which critics say should take place regardless.
Nationals and One Nation senators are expected to oppose the bill in a motion on September 15, on the grounds it threatens the native timber industry.
A NSW government spokesperson on Tuesday confirmed the long-awaited Great Koala National Park would not go ahead without the Improved Native Forest Management Method.
"The creation of the Great Koala National Park is conditional on the successful registration of a carbon project under the INFM method," the spokesperson said.
But the NSW government said it would not sell carbon credits earned through the creation of the park to the fossil fuel industry and instead prioritise sales to state-based manufacturing industries.
NSW Greens MP Sue Higginson on Tuesday urged her party's federal senators not to side with the Nationals in disallowing the scheme despite it being less than perfect.
"This was not an easy decision to make, but I know the priority of protecting forests right now has to come first, because that’s the choice we have," the former environment lawyer said.
An Australian Greens spokesperson said the party was in discussions with the federal government and consulting with the climate and environment movement ahead of the vote.
"The Greens are fighting to ensure that forests and the climate are both protected," they told AAP on Tuesday.
Disagreement over the legislation has caused a rift in the Greens, with former leaders Bob Brown and Christine Milne among those to publicly oppose it.
Mr Brown said carbon trading should not be a requirement for establishing national parks.
"This Labor move means future national parks will depend on trading companies getting priority," he said.
"I appreciate fellow environmentalists feeling they have no option to go along with this, however, I call on senators not to be coerced by Labor’s anti-environmental gimmick."
