The Turnbull government has failed to secure unconditional support for its signature energy policy, the National Energy Guarantee, at a meeting of state and federal governments in Sydney on Friday.

Federal Energy Minister Josh Frydenberg nevertheless insisted the meeting was “a big step forward for the NEG”, saying states had agreed that draft legislation for the policy should be released next week “for a period of consultation”.

However, Labor-governed states Queensland, the ACT and Victoria have expressed strong reservations about the NEG, meaning the success of the legislation is far from guaranteed.

The federal government had hoped to come to an agreement with the states this week, and the resistance of the Labor states – led by the Andrews government in Victoria – will be a blow.

“What ministers have now agreed, is following the party room consideration of federal legislation and a teleconference on Tuesday, the exposure draft of the state legislation will be released for a period of consultation,” Mr Frydenberg said.

“We are hoping that following the consultation, ministers will agree, to implement the design of the National Energy Guarantee.”

The NEG is a federal government policy with three aims: to secure energy supply, reduce prices and lower carbon emissions to meet Australia’s commitments in the Paris accord.

It plans to achieve these objectives by setting quotas that energy retailers must meet exclusively by market mechanisms. The government will impose no new taxes or provide any subsidies.

On Wednesday, the Andrews government in Victoria said it would only support the NEG if it included tighter emissions targets.

Mr Frydenberg rejected these demands on Friday.

“We have made it very clear the target and the means of implementing the target are changing is a matter for the federal government,” he said.

“It is the federal government that is the signatory to the Paris agreement, it is the federal parliament that will pass legislation implementing the reduction target,” he said.

“The Labor states should be focused on one thing: lowering power prices for people in their jurisdiction. Take Victoria for example. There’s nearly 300,000 manufacturing jobs.

“You have chemical manufacturers, paper manufacturers, small businesses, speak out in recent days, telling the Andrews government to get behind the National Energy Guarantee.

“We’ve seen an incredible coalition of stakeholders from farmers and miners to manufacturers, and small business, to energy user, and energy consumer groups and the energy industry itself, say it’s time to deliver the National Energy Guarantee,” Mr Frydenberg said.

For the NEG to become law, legislation will need to pass both state and federal parliaments.

There will be a state election in Victoria in November, meaning the government will go into caretaker mode in October. There will also be an election in New South Wales early next year.

That means Mr Frydenberg has a very short window in which to persuade the states to support the NEG.

Victorian minister for energy, environment and climate change Lily D’Ambrosio said on Wednesday: “We won’t support any scheme that puts our renewable energy industry and Victorian jobs at risk.

“We can still get this right – but only if Malcolm Turnbull stares down the climate-crazies in his party and puts a workable scheme on the table that doesn’t hurt local jobs and households,” she said