With the carbon tax due to start next month, Latrobe Valley expects thousands to lose their jobs.
A Victoria University study found the valley will be one of the areas worst affected by the carbon tax since it generates most of the state's electricity.
The Mayor of Latrobe City Ed Vermeulen expects around 2,000 job losses and is asking state and federal governments to absorb some of the economic pain.
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“Our approach is to economically diversify the area here and we're working hard on that for instance we have the only aeroplane factory in Australia in Latrobe city,” he said.
But despite the best intentions, job losses are likely, and strikes that could cripple Victoria's electricity generation could follow.
Green groups, however, argue that the carbon tax will not have a signficant impact on the local economy.
“What we're seeing is Latrobe Valley generators are getting very large amounts of compensation in the early years of the scheme,” Mark Wakeham from Environment Victoria said.
As part of its carbon plan, the government is negotiating the closure of the worst polluting power stations. It will buy around 2,000 megawatts of capacity and then shut them down.
The Nationals' federal member for Gippsland, Darren Chester says the closure program is only making things worse.
“We're talking about hundreds of jobs hundreds of well-paid jobs being taken out of the local economy,” he said, “and that's all adding to this crisis of confidence in the local community.”
But some believe the carbon tax will actually help the valley.
The Gippsland Trades and Labour Council's John Parker says the scheme brings certainty, and more jobs would be lost without the tax.
“Over the last ten years we haven't had that certainty,” said Mr Parker, “there's been no investment in the Latrobe Valley.”
So far, three Latrobe Valley power stations have been shortlisted.
EXTENDED INTERVIEW
SBS's Richard Davis travelled to the valley and spoke to power station worker, Angelo Gaudiano, who reveals the personal cost of pricing carbon.
Angelo Gaudiano expects to lose his job after the carbon tax begins and is deeply frustrated that the valley is carrying much of the burden of reducing greenhouse gas emissions.
Watch Richard Davis's report on YouTube:
