THE Nationals could split with the Liberal Party over the Federal Government's proposed Carbon Farming Initiative.
The CFI would offer farmers the chance to sell carbon offsets by growing trees or sequestering carbon in soil.
The Liberals are yet to formally discuss the CFI, but leader Tony Abbott's Direct Action plan also offers farmers incentives to lock up carbon in trees and soil.
The Nationals are worried the CFI is similar to the carbon-sink forests legislation put up by the Rudd Government, which they said would have seen farmland gobbled by trees.
The Nationals crossed the floor to vote against carbon sink forests when Malcolm Turnbull was coalition leader in a move that saw Nationals Senator Fiona Nash stripped of her parliamentary secretary role.
Senator Nash told The Weekly Times she supported improved environmental outcomes, but was concerned prime agricultural land would be replaced with trees.
"What's to stop a multi-national company from buying up productive farm land and planting trees to offset its emissions and boost its environmental credentials?" Senator Nash asked.
A CSIRO report has found food-producing areas of the Murray-Darling Basin could go under trees if carbon reached $36 a tonne.
Nationals Senate leader Barnaby Joyce said there was no point transforming food-producing land into "a refuge for rats and mice".
Nationals agriculture spokesman John Cobb said the CFI could "skew the market in favour of less productive agriculture" as managed investment schemes had done.
Liberal Senator Richard Colbeck said the Liberals position would be discussed once the Senate committee on Environment and Communities had looked at the CFI.
He said he would raise his concerns around "permanence" - trees providing carbon offsets would be required to remain in the ground for 100 years - when the party discussed the issue.
"Lots can be achieved through (planting trees in) riparian reserves and in wind rows," Senator Colbeck said.
Liberal MP for Wannon Dan Tehan said the CFI combined with MIS "could be a dangerous combination".