Announcing the program in the Queensland state capital Brisbane, they said the oxy-fuel combustion technology could provide a "retro-fit" which could be applied to existing power stations.

The Australian Coal Association said the technology would involve the capture and geological storage of carbon dioxide, the leading cause of global warming, after substituting air with pure oxygen in the generating process.

"To meet growing energy demand, coal will continue to dominate our electricity mix for the foreseeable future," said executive director Mark O'Neill.

"Technologies like oxy-fuel combustion and carbon capture and geological storage will be crucial for reducing emissions in coming decades, along with increased use of renewables and improved energy efficiency."

Backed by the state government and a major Japanese power engineering company, the project involves feeding pure oxygen rather than air into a modified boiler and recycling some of the gases through the combustion chamber.

This should raise the concentration of carbon dioxide. Low concentrations of the gas in existing power stations makes it very expensive to separate and process and is seen as the major barrier to its capture.

Among the partners in the project are Japan's Ishikawajima-Harima Heavy Industries and Center for Coal Utilization. Various Australian bodies involved include the University of Newcastle.

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