One of Australia's biggest electricity generators says it hopes to convert its Yallourn power station from brown coal to gas in the next 10 to 20 years.
TRUenergy's managing director, Richard McIndoe, told ABC1's Inside Business program that the switch to gas would be one of the most effective ways of reducing CO2 emissions.
He said the speed of the change, however, would depend on government policy and compensation.
Mr McIndoe says the conversion would cost up to $2.5 billion and cut CO2 emissions by 75 per cent.
Power prices would also need to rise by 20 per cent to make the switch from coal to gas commercially viable.
Yallourn, based in the brown coal-rich Latrobe Valley, currently generates almost a quarter of Victoria's electricity and 10 per cent of the National Power Grid's needs.
It was sold to Hong Kong interests as part of a privatisation push in the 1990s.
It is estimated the Latrobe Valley's power stations at Yallourn and Hazelwood contribute about 40 million tonnes of the nation's 600 million tonnes of CO2 emissions annually.
Mr McIndoe says the Yallourn plant has a life of a further 25 years and compensation would be required to keep the company's balance sheet intact and allow it to build new efficient generators.
"We bought the power station under a set of policies and regulations that were pretty clear when the Victorian government sold those power stations," he said.
"Actually, up to a year-and-a-half, two years ago, [they] were very clear as well.
"So the massive change in the regulation under which we operate is a serious concern to an international investor such as ourselves.
"Secondly, to preserve our balance sheet is very important if we are going to be investing in new generation."
Mr McIndoe says policy changes would be needed to speed up the conversion.
"You can either impose a big price on existing coal-fired generation elsewhere, or you can effectively subsidise the cost of gas-fired generation to make it competitive," he said.