Scott Morrison doesn't think regional Australia has anything to fear from a transition to a less emissions-intensive economy.
Resources Minister Keith Pitt wants the coalition to consider establishing a $250 billion loan mechanism as a last resort for mining projects that can't secure private finance.
When asked about the proposal, the prime minister emphasised the importance of "embracing a new energy economy" ahead of the Glasgow climate summit.
"I believe Australia can do this and ensure that the regions excel, that the regions actually exceed their current prospects, and that is done by embracing a new energy economy and the technology that is needed to support that," Mr Morrison told reporters in Canberra on Thursday.
The government wants to be able to announce more ambitious emissions reduction targets in time for the COP26 summit from October 31, but is yet to secure agreement from the junior coalition partner.
The Nationals have pushed for the agriculture sector to be exempt from any target.
Mr Morrison labelled ongoing negotiations with the Nationals a "very good faith process".
The prime minister maintained Australia's contribution to tackling global warming was, on its own, relatively insignificant and developing countries needed to be involved.
He gave a further indication he would likely skip the Glasgow summit and instead send a senior minister to the United Nations talks.
"We can all go to meetings. But the thing that will actually change it is the transformation delivered by new technologies," Mr Morrison said.
Mr Pitt, who represents the Queensland seat of Hinkler, is among the most vocal coalition members holding out on an emissions target.
"In Australia, we shouldn't be dictated to on domestic policies by foreign financiers," he told AAP.
Instead, he called on the government to look at a $250 billion loan mechanism to secure coal projects banks and insurers wouldn't fund.
"They (mining projects) are perfectly viable, they are perfectly legal," he said.
"Yet we have financiers and insurers who are taking an idealistic position."
His proposal would either expand on or be modelled off the Northern Australia Infrastructure Facility, Regional Investment Corporation or Clean Energy Finance Corporation.
"(The mining sector) is a perfectly legal business, a perfectly profitable business and one which will be around for many decades."
Deputy Prime Minister Barnaby Joyce was sympathetic to Mr Pitt's demand.
"I don't like the idea that our sovereignty of our nation is determined by a financing arm of another country or a board member," the Nationals leader told ABC radio.
Liberal MP Jason Falinski, representing the Sydney seat of Mackellar, thought it was a bad idea.
"Governments getting involved in lending money to private sector firms has never worked anywhere in the world. It's not something that we should try and do," he said.
Australian Associated Press
