ELEANOR HALL: After abandoning the floor price on its carbon tax last week, the Federal Government has now walked away from another key part of its clean energy plan.
It will no longer pay to shut down some of Australia's dirtiest coal fired power plants.
The Government says the companies were asking too much in compensation.
The move has drawn swift condemnation from the Federal Opposition, the Greens and environmentalists who all say the plan was designed to fail.
Simon Lauder has our report.
SIMON LAUDER: The Government's move to shut down 200 megawatts of coal fired power by 2020 was sold as an important part of the plan to meet Australia's emissions reduction targets.
This morning the Resources Minister Martin Ferguson announced the talks have failed.
MARTIN FERGUSON: I'm announcing on behalf of the Government today its decision to actually cease contract for closure negotiations.
SIMON LAUDER: The Government was in talks with five companies which had expressed an interest in being paid to shut down. Three in Victoria, one in South Australia and one in Queensland.
Mr Ferguson says they wanted more money than the Government was willing to pay.
He won't say how much the Government offered, nor how much the companies wanted.
MARTIN FERGUSON: These negotiations are of a commercially sensitive nature. As it effectively amounted to owners of private assets putting on the table in confidential discussions with my department, their valuation of their assets.
And it's inappropriate that I reveal those valuations nor is it appropriate that I reveal what we were prepared to actually offer in terms of our own private assessment of the valuation of those assets.
SIMON LAUDER: The contracts for closure targeted some of Australia's dirtiest power plants, including Hazelwood and Yallourn in Victoria's La Trobe Valley.
Mr Ferguson says they will now keep running until their owners decide it's not worth it.
MARTIN FERGUSON: I think the nature of the market will determine the future of these and I might say other coal fired power stations in the future. You actually study what's going on in the energy market at the moment. Demand is down.
Have a look at the most recent report of the Australian energy market operator. And I must say each of these companies has done their own assessment with respect to their potential futures and the value of their assets.
These market assessments effectively mean that the requirement for new baseload investment in Australia on the east coast and the national energy market is considerably pushed out. Considerably pushed out.
Therefore that is one of the issues in association with a variety of other issues, for example what is the potential price of gas over time on the east coast, which has a material impact in terms of the valuation of these assets and whether it was value of money for government.
SIMON LAUDER: It's the second element of the Government's clean energy package to be abandoned in two weeks after the government decided to scrap the floor price for the carbon tax and link the system with the European emissions trading scheme.
Although Mr Ferguson's press release denied last week's decision was a factor in the failure of contract for closure negotiations, he later admitted it was.
MARTIN FERGUSON: The companies themselves have done their own assessments of the value of carbon and in essence that was only one factor and it was a very minor factor in terms of our consideration of where we ended up with respect to value for money in terms of the potential opportunity to close a range of coal fired power stations in Australia…
…SIMON LAUDER: Mark Wakeham from Environment Victoria says the failure compromises the entire carbon tax package.
MARK WAKEHAM: And you can't have a clean energy future when you've got a power station like Hazelwood operating indefinitely.