The federal government had proposed to drastically reduce the target to a "real" 20 per cent of Australia's energy use and exempt trade-exposed industries, including aluminium.

But the opposition rejected the plan yesterday, saying it would not sign up to a scheme that "kills jobs and investment, increases carbon pollution and forces power prices to rise".

Labor MPs would not say whether they would support the exemption, but pledged to continue negotiating with the government.

Tasmanian Labor MPs have previously said that they would support an exemption for the aluminium sector.

A spokeswoman for Bell Bay Aluminium said the target was currently costing the company $8-10 million a year.

"[We] urge the parties to reach agreement as quickly as possible so that amendments can be made to the Renewable Energy Target legislation to provide a 100 per cent exemption for aluminium from January 1, 2015," she said.

Before the negotiations, Industry Minister Ian Macfarlane said the proposal was the best way forward for the scheme.

"It is a plan which will provide the confidence to the renewable energy sector that they need," he said.

"If the Labor party and the Coalition are able to negotiate an outcome, then the industry can go forward and invest confidently. If we can't, it's the renewable energy industry that will get hurt."