The Environment Protection Agency or EPA has approved a new coal-fired power plant, which will use gas from brown coal and natural gas to produce electricity, in eastern Victoria.

The HRL plant at Morwell, in the Latrobe Valley, is half the size of what was proposed by the company. The government will consider whether to allow it to expand later.

EPA’s chief executive, John Merritt, says the plant will demonstrate the world's finest practice for brown coal power generation.

"The works approval requires a range of mandatory monitoring facilities that cover a host of issues, including emissions, not just of greenhouse gasses, but of other emissions as well," Merritt explained.

Merritt accounts that the new plant will produce 30 per cent fewer carbon emissions than other coal-fired power plants.

"A proposal that contemplates using coal and delivering a 30 per cent improvement in its emissions is within the act, and we're required to assess it against that, and that's what we've done," he added.

Kelly O'Shanassy of Environment Victoria conveys that EPA has failed the environment and disregarded the local community.

"It shows that EPA is completely out of touch with communities. Four thousand submissions opposing this new coal fired power plant, 11 supporting it. So clearly the EPA is not listening to communities," Kelly said.

Climate and energy campaigner, Julien Vincent, explains Victoria needs to move away from brown coal and focus on renewable energy.

"The person who really needs to come in now and intervene is Prime Minister Gillard. She's made a commitment that no dirtier coal-fire power stations will be built in Australia under her watch and the Victorian EPA has made a mockery of that call and is putting her climate credentials under threat,” he said.