A $119 million demonstration coal plant in regional Victoria has been labelled a "distraction", as conservation groups vow to oppose it.
The state and federal governments have given Chinese giant Shanghai Electric $25 million towards developing the plant at Loy Yang A power station in Morwell.
Energy and Resources Minister Russell Northe said the plant would upgrade brown coal, generating fewer emissions and making potential export more likely.
"Victoria is home to one of the world's largest brown coal reserves and this joint investment will enable the development of new smarter, cleaner and sustainable uses for this important resource," Mr Northe said on Monday.
He said more than 100 jobs could be created during construction of the $119 million plant, and up to 40 jobs during the project's operation.
But Deputy Opposition Leader James Merlino said the plant was a distraction from Morwell's problems following the 45-day Hazelwood coal mine fire.
"There are roofs full of ash, there are children still sick, the community's still hurting," Mr Merlino said.
"This is a demonstration plant. Any benefit for the Latrobe Valley and the Victorian community is years away."
Friends of the Earth spokesman Shaun Murray said using public money to attempt to establish a brown coal export industry was "perverse".
"We will blockade coal trains if necessary to stop this dangerous and unnecessary industry from proceeding," Mr Murray said.
Wendy Farmer, President of Voices of the Valley, said public money should not go to an international company when people in Morwell were suffering from the effects of the blaze.
"It's quite bewildering that our state and federal governments think that funding these new projects is a higher priority - we feel betrayed and abandoned," Ms Farmer said.
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