Mr Taylor brushed off the commission's report,saying power prices were already coming down because of the government's pressure on large energy providers.
A source within the COAG meeting said ministers were angry at the federal government's moves.
"It got very ugly quickly,"they said.
"It was a full-on revolt."
A meeting of the state energy ministers early next year is likely to deal with the issues raised by Mr Harwin.
A source close to the NSW government said the federal government was being held to ransom by climate sceptics who won’t move on emissions but believed its plan would have received support from enough state energy ministers to pass.
Mr Harwin aimed to ask the Energy Security Board – which is the overarching energy industry body – to develop national policy options for how the country can achieve net zero carbon emissions by 2050.
Minister for Energy Angus Taylor and Minister for Resources and Northern Australia Matthew Canavan address the media after the Energy Council meeting.Credit:Alex Ellinghausen
Mr Taylor downplayed suggestions the meeting had become angry,saying that it was"focused".
He said key elements of the government's agenda had been agreed upon,including a requirement for an electricity retailer reliability obligation from the middle of next year.
"Our country is built on having a fair deal on energy. It has been for a long,long time. It's crucial to stay focused on this. We stayed focused on it today,"he said.
Queensland Energy Minister Anthony Lynham backed Mr Harwin,saying Mr Taylor had blocked any discussion of emissions from the energy sector.
"Queensland and the states want to address climate change but we're simply blocked by the federal government,"he said.
Labor energy spokesman Mark Butler said the argument showed the Morrison government was being isolated even by state coalition administrations.
"Scott Morrison stands completely isolated in his refusal to implement the National Energy Guarantee,"he said.
"Households and businesses across Australia are paying the price because of this dogged ideological position from Scott Morrison through higher and higher power prices."
Despite the emissions policy's swift rejection by the federal government,Labor states were surprised by NSW's proposal,although they supported its discussion.
One insider noted Mr Harwin failed by surprising other energy ministers with the proposal.
"He clearly hadn't done his homework on the rules,instead choosing to brief the media of his intention rather than his council colleagues,"he said,"deliberately holding notice of this item until the latest possible moment rather than putting it on the agenda as per the normal process."