Premier John Brumby announced that a $110 million fund would be used to establish large-scale pre-commercial carbon capture storage demonstration projects as part of the second generation Energy Technology Innovation Strategy.

A further $5.2 million will be spent on investigating carbon storage sites in the Gippsland Basin.

Brumby also announced that $12.2 million would go to creating Clean Coal Victoria, an organisation dedicated to managing Victoria's brown coal reserves and carrying out exploration in under-explored areas to establish new resources.

“The first ETIS initiative attracted over $1.2 billion in investment and we would expect this next commitment to do even better in securing the future of the Latrobe Valley, including attracting significant overseas investment," Brumby said.

“We are taking action now to ensure Victoria can continue using its world-class brown coal and gas resources to create affordable and reliable energy and to capitalise on emerging clean coal opportunities."