Victorian Premier Ted Baillieu says more information is needed about any plans to close down Hazelwood power station under the federal government's carbon price package.
The carbon price deal will include a plan to pay for the closure, or conversion to gas, of at least one of Australia's coal plants over an extended transition period, Fairfax reports.
It says federal Energy Minister Martin Ferguson has flagged the possibility of the government paying to retire Hazelwood, Australia's `dirtiest' coal-fired station, or the smaller Playford plant in South Australia.
Mr Baillieu said a plan would be needed to shut down the Latrobe Valley plant.
"Hazelwood supplies a significant amount of Victoria's energy," Mr Baillieu told Fairfax Radio on Friday.
"It's brown coal based, in that respect there's a mission there to reduce emissions from brown coal.
"But there's no use just saying we're going to close it down without a plan to replace it, without a plan to deal with the cost of it and and who's going to pay for it."
Environment Victoria said the inclusion of funds to close Hazelwood in the carbon price package would be a breakthrough in tackling climate change in Australia and could ensure the scheme delivered significant emission reductions in its early years.
"It would also be a significant improvement over the previously proposed carbon pollution reduction scheme which offered $7.3 billion in compensation to coal-fired power stations without any guarantee of plant retirement," Environment Victoria campaigns director Mark Wakeham said in a statement.
"Hazelwood is the most logical power station to target with a closure fund, given that it is the most inefficient power station in the country, and that Hazelwood's owners have signalled that they are willing to consider closure."
Mr Wakeham said there were clear alternatives to supply Victoria's energy needs with far less greenhouse pollution.
He said the package also needed to deliver funding for communities like the Latrobe Valley to support workers and develop new jobs and industries.