Durrant highlighted the failure of law-makers to state Australia's emissions reduction targets and timelines for developing such targets in the CPRS legislation as a key legal flaw that must be addressed in developing a new scheme.

"The government needs to design its scheme to incorporate a long-term emissions reduction target and a timeframe for achieving that target," she said.

"Appropriate medium and long-term emission reduction targets, with corresponding caps for the carbon pricing scheme, should be deep enough to contribute to global efforts to mitigate climate change."

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Durrant added that other key failures of the ETS relate to proposals to offer free carbon permits to some industry sectors and to allow an unlimited number of import credits from global carbon trading markets.

"The Federal Government is suggesting we allow the import of international carbon instruments from overseas markets after an initial three to five year period," she said.

"The rules surrounding this have not been announced yet. However, with the previous ETS it was proposed that the number of imports of international offsets would be unlimited - which would be very undesirable.

"Unlimited offsets would undermine the cap set for the carbon pricing scheme - resulting in excess supply of carbon instruments to the market and, ultimately, lower carbon prices."