A plan to cull hundreds of thousands of camels from the deserts of central Australia in exchange for carbon credits has been knocked back by the Federal Government.

It is estimated that there are more than a million feral camels in the Red Centre and surrounds, and each animal emits about a tonne of methane gas each year.

Private company Northwest Carbon wanted to cull and sell the camels in exchange for credits under the Commonwealth's carbon farming initiative.

Managing director Tim Moore says the plan would make camel elimination a sustainable project.

"The carbon farming initiative specifically identifies feral camel management as an activity that should be able to generate carbon credits," he said.

Mr Moore says the rejection of the proposal is a major setback to controlling camel numbers.

"No-one seems to have been able to provide a long-term solution to date," he said.

The Government says Northwest Carbon has not provided enough information about how the reduction of emissions would be assessed.