The carbon industry said the great irony of the policy was it came just days after the government reclassified carbon farming as primary production for tax purposes, and farmers were now in a situation where agricultural activity could be vetoed by the Agriculture Minister.

From April 8, the minister will have the power to prevent native forest regeneration projects that take up more than one-third of a farm from going ahead if they will have an adverse impact on agricultural production or regional communities.

Agriculture Minister David Littleproud said the policy was a "safety valve" to ensure carbon farming remained a net positive for agriculture, and the measures were designed to prevent corporate and passive investors from taking advantage of the Emission Reduction Fund.

"Unfortunately, what we've seen instead in some cases are projects that negatively impact the neighbours and the town," Mr Littleproud said.

"We don't want to see entire farms locked up, becoming havens for weeds and feral animals as families leave the land.

"I support well planned projects that involve the farmer and manage the land, I hope that there will be many projects that present no risk to community. But I will not hesitate to act to protect community and agricultural interests over corporates and passive investors."

Carbon Market Institute chief executive John Connor is strongly opposed to the veto powers and said there was a lack of evidence supporting the policy. But now that it was set to be implemented, he said the devil would be in the details.

"We're deeply concerned, we haven't seen the guidelines about how ministerial discretion might be applied," Mr Connor said.

"This is not a reflection on this Agriculture Minister, but if the guidelines are lax, it might come down to a grumpy neighbour complaining about someone else and that informing a decision."

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Mr Connor said the "bitter irony" was the extra red tape came at a time when the government and the agriculture industry was trying to integrate carbon farming into agriculture production.

In the budget, the government announced profit from carbon credits would be taxed at the reduced rate of on-farm income, rather than off-farm income, which is expected to save primary producers $100m over four years.

"We are now in this disappointing and surprising situation where an agricultural activity is now open to veto by the Agricultural Minister," Mr Connor said.

National Farmers Federation chief executive Tony Mahar said the veto powers were a "reasonable measure" to ensure there were no "unintended consequences" from the emerging carbon market.

"A number of things in the past - such as the water market - the policy seemed right at the time, but in hindsight it didn't turn out as planned," Mr Mahar said.

"We're supportive of farmers embracing the opportunities around carbon and biodiversity. But what we don't want is large-scale productive land taken away from agriculture production."

Emission Reductions Minister Angus Taylor said the new rule was an important safeguard for rural and regional communities.

"As the ERF continues to grow, it's important that we get the balance right between managing land, storing carbon and ensuring the ERF has a positive impact on agricultural production," Mr Taylor said.

"The higher the standard industry sets, the more confidence the government and regional communities can have in this scheme."