The government rejected the recommendation by chief scientist Alan Finkel to create a CET made in a review of Australia's energy sector in July.
Finkel's report said the CET would allow all electricity generators to receive incentives, based on the emissions produced and in a technology-neutral way.
The CET was Finkel's suggestion to replace the current federal renewable energy target (RET), which expires in 2020. The RET aimed for 33TWh of renewable generation. It was previously cut from 41TWh in 2015.
Instead, Malcolm Turnbull's coalition government has formed another technology-neutral system by removing levels of support or tax, "creating a level playing field for all energy sources".
"The guarantee is made up of two parts that together will require energy retailers and some large users across the national electricity market to deliver reliable and lower emissions energy generation each year," the government said in a statement.
The two parts of the new arrangement include a "reliability guarantee" to ensure the correct level of "dispatcahble energy... such as coal, gas, pumped hydro and batteries". The Australian Energy Market Commission and the Australian Energy Market Operator will set the level.
The second promise is an "emissions guarantee" to "contribute to Australia's international commitments".
"This two-part guarantee will deliver affordable and reliable energy for households and businesses without subsidies, taxes, emissions trading schemes or carbon prices," the government explained.
It hopes the new system will put lower consumers' bills and reduce spot price volatility.
In addition to the new "guarantees", Turnbull's government has also arranged a new package supporting the domestic supply of gas.
The nation's renewables trade body, the Clean Energy Council, has heavily criticised the proposals, claiming the government has blown a "golden opportunity", and warned of another slowdown, like the one that crippled Australia's renewable growth in 2015 and 2016.
"The federal government's decision to walk away from a CET is likely to result in a substantial slowdown in new clean energy investment, meaning power prices will keep rising and voters will continue switching off," the Clean Energy Council said.
CEC chief executive Kane Thornton said: "The CET was the best opportunity in years to lock in the long-term bipartisan energy policy needed to encourage investment in cleaner energy while improving system reliability and pushing down power prices."
"A company which is thinking about investing in a project worth hundreds of millions of dollars needs to have confidence the goal posts won't be moved halfway through the game," Kane added.
"As the New South Wales government has noted, the state's old coal and gas power stations struggled to deal with the heatwaves at the beginning of the year and the focus on reliability is welcome.
"We believe energy storage and demand management can provide much-improved reliability at times of high stress compared to the current system, but many people will be watching the final policy settings very closely.
"As an industry we will continue to push for the effective energy policy most Australians agree is urgently needed."