The Government said the CRC's coal-drying technology was moving from the research stage to the development stage with the building of a A$5 million pilot plant expected in the next two years.

The decision has been strongly opposed by Victorian Energy Minister Theo Theophanous who told The Age the decision was shortsighted and would slow “important research that could provide the answer to the greenhouse challenge for the energy sector.”

Theophanous said the withdrawal of federal funding would mean the closure of the CRC.

The centre was first established in July 1993 and last secured federal funding of $15 million in July 1999 for seven years under the Commonwealth Government CRC Program.

CRC was established to develop technologies to reduce greenhouse gas emissions from lignite-fired power stations while enhancing Australia's international competitiveness from low cost energy. The technologies under development relate to both current technology (pulverised coal-fired boiler) power stations and to high efficiency advanced cycles.

The Victorian Government has already committed funding of $10.5 million to the CRC for seven years from July 2006.