Carbon emission restrictions for VIC polluters dumped

The coalition won't go ahead with the former Labor government's plan to make it illegal for coal-fired power stations in Victoria to emit more than 0.8 tonnes of carbon per megawatt hour.

The state's greenhouse gas emissions reduction target will also go, after modelling conducted by economic consulting firm ACIL Tasman found it would cost Victoria $2.2 billion to buy international offsets.

Environment Minister Ryan Smith said Victoria's environment and climate change policies were under review and would not be confirmed until after talks with state and federal environment ministers in May.

"There is a federal target of five per cent - I don't believe that Victorians should pay four times the cost of their state counterparts," he told reporters on Tuesday.

"We will be working in concert with the federal government to see what programs that we currently have in place are appropriate to maintain."

Energy Minister Michael O'Brien said the government decided not to proceed with restrictions on new coal-fired power stations partly because the commonwealth had not introduced national standards.

"The combination of commonwealth policies and market conditions have the practical effect that no new coal-fired power stations will be economically viable unless they are based on modern technology with significantly lower emissions," he said in a statement.

Environment Victoria chief executive Kelly O'Shanassy said Premier Ted Baillieu had caved in to the demands of polluters by scrapping the higher greenhouse gas reduction target.

"It's a terrible decision by the Baillieu government and basically puts the nail in the coffin for a clean energy future for Victoria," she told reporters.

"It's environmentally reckless ... the Baillieu government either don't believe in climate change, don't understand the impacts of climate change or don't care."

Victorian Employers' Chamber of Commerce and Industry (VECCI) chief economist Steven Wojtkiw said scrapping the state target would take pressure off business.

"We already have a national emissions reduction target and the impending carbon tax, so it's good news for Victorian business," he told reporters.

"The fact that we were at risk of having two targets, two plans, two burdens, and costs on business, meant that would put jobs and investment at risk."

Opposition Leader Daniel Andrews said investment in wind power had dried up since the coalition had come to power and introduced some of the most restrictive planning laws in the world.

Axing the 20 per cent target would be like putting up a sign that Victoria was closed for business, he said.

"It's not the time to be taking a step backwards. It's not the time to be turning our backs on the economic and employment opportunities that clean energy can present to us," he said.

Andrews would not commit to restoring the 20 per cent target should Labor win office at the November 2014 election.