Federal Resources Minister Simon Crean is expected to throw the federal government's support behind the deal in Melbourne on Friday.
'This is a disastrous first action for the new Gillard government,' Environment Victoria chief executive Kelly O'Shanassy said.
'We're calling on Prime Minister Gillard to take control on climate policy and withdraw the federal government's support for a brown coal export industry.
'Prime Minister Gillard has a difficult task ahead of her on climate change and it's a worrying sign if one of the Gillard government's first announcements is to support a brown coal export industry.'
Ms Gillard is resisting pressure from green groups to take faster action on climate change and says she is in no hurry to start emissions trading.
Labor's decision in April to delay emissions trading until at least 2013 contributed to a dramatic dive in the standing of the government and former prime minister Kevin Rudd.
Ms Gillard indicated it would be business as usual on emissions trading under her watch, because there was not a community consensus on the need for a price on carbon.
Ms O'Shannassy said if the project in the Latrobe Valley went ahead millions of tonnes of greenhouse pollution would be pumped into the atmosphere each year.
'This is precisely the wrong message for Australia to be sending ahead of this weekend's G20 meeting where fossil fuel subsidies are on the agenda,' she said.
Green groups are still holding out hope an emissions trading scheme – or another major climate scheme – could be brought on before 2013.
The Greens candidate for the Melbourne seat of retiring Finance Minister Lindsay Tanner said the government's position on energy policy was 'criminal'.
'We know that burning and exporting coal to make energy is not sustainable and we know that we have to rapidly transition away from coal and to renewable energy,' candidate Adam Bandt said.
'To be signing deals to export and mine more coal are the signs of a party that's living in the 20th century, not in the 21st century. The science just says we can't do this anymore.'
Mr Bandt said Australia should be leading the world in renewable energy technology but was instead going backwards.
Read about the last time we stopped the government's exporting plans for brown coal in their tracks