Each government will contribute $45 million to pay for the development and rollout of brown coal technologies, including drying for export, conversion into fuels and fertilisers, and reducing emissions from coal-fired electricity generation.

The announcement comes ahead of the Victorian Government opening its controversial tender for new allocations of brown coal in the Latrobe Valley.

It follows last week's dumping of a $100 million federal grant to a proposed coal-fuelled power plant in the Latrobe Valley because the proponents did not meet requirements.

Federal Energy Minister Martin Ferguson said: "The program will ensure continued opportunities for economic growth, employment in the Latrobe Valley region and a sustainable source of energy for Victorian industries and households.

"There is also potential for brown coal to develop into a valuable export, which would not be possible without the technological innovation that may also assist in meeting the Government's emissions reductions targets of five per cent fewer emissions than 2000 levels by 2020.''

Victorian Energy Minister Michael O'Brien said: ''Our brown coal resource has for a long time benefited all Victorians, delivering a reliable and affordable power source that has underpinned our economic growth and been a competitive advantage for the state.

"There is a long term viable future for the Latrobe Valley based on the sustainable use of brown coal.''

The announcement will enrage green groups who say in the light of climate change government money should instead be focused on renewable energy technologies.

Expressions of interests for grants will close on November 19. The governments says the first funded project will have construction scheduled for 2013-14.