Treasurer Peter Costello and Industry Minister Ian Macfarlane announced $125 million in funding for the first two projects under the $500 million low emissions technology demonstration fund (LETDF).
The first is a $75 million grant for a $420 million large-scale solar concentrator in north-western Victoria to be built by Melbourne-based Solar Systems Pty Ltd.
The project will start in 2008 and reach full capacity by 2013.
The second grant is $50 million towards a $360 million pilot for a brown coal drying and a post-combustion carbon dioxide capture and storage project at the International Powers' Hazelwood facility in Gippsland.
Mr Costello said the energy sector had been instrumental in Australia's economic success and that ensuring it was environmentally sustainable in the longer term was a key factor in the government's climate change strategy.
Projects ‘not enough’
The Australian Conservation Foundation (ACF) has welcomed the move but warned it was a drop in the ocean to what is needed to address climate change.
“We really need investment of the scale that matches the problem and we’re just not seeing that at the moment,” said Strategies Director Alex Gordon.
“If you compare the total government funding on climate activities including this announcement today, they’re spending $280 million this year on all climate activities and yet they’re spending four times that amount in concessions to company car holders to drive further.”
Ms Gordon says the government needs to commit to greenhouse gas targets and charge polluters for their emissions.
Greenpeace spokesman Danny Kennedy said the government is starting to bow to public pressure and concern about climate change with today's announcement.
"The proposed $400 million Solar Systems plant is a step in the right direction but what is needed most is long-term signals and structural changes, not one-off announcements," he said in a statement.
"If the federal government's strategy is to lay out a series of
LETDF announcements from now to the election, it is a thinly disguised attempt to avoid the real action that is needed - moving Australia away from polluting coal."
Mr Kennedy said that until the government introduced structural changes such as a price on carbon, it would fail to send the necessary signal required to massively increase the uptake of clean renewable technologies already available to Australians.
"Perversely, at the same time as Howard announces millions in drought relief, he throws similar amounts of taxpayers' cash at the climate change culprit -- the coal industry."