The opening of Australia's first carbon capture and storage (CCS) demonstration plant in Victoria has been hailed as a major step toward making "clean coal" viable.

The Otway Basin Project in south-west Victoria will see up to 100,000 tons of carbon dioxide captured from natural gas injected 2km underground in a depleted gas reservoir.

During the two-year trial, CO2 will be compressed and transported to the basin near Nirranda, about 30km east of Warrnambool.

The project is part of research to learn if emissions can be successfully trapped in geological formations, as a way of curbing the greenhouse gases produced by fossil fuels.

"The success of this program will confirm the CCS technology as a viable option to reduce the carbon footprint of coal," federal Resources and Energy Minister Martin Ferguson said at the opening of the plant.

"The Australian government recognises there is no single solution to reducing our carbon footprint, which is why we are supporting research and development of a range of options," he said.

"I hope this project will encourage community acceptance of CCS and its potential role in reducing greenhouse gas emissions."

The opening was attended by energy officials from major emitting nations including the United States, Japan and India.

The Otway project is being conducted by the Cooperative Research Centre for Greenhouse Gas Technologies - known as CO2CRC - using $40 million in funding from federal and state governments, research organisations and industry.

"Using an innovative geotechnical monitoring program, the CO2CRC Otway project plays an important role in demonstrating the safety of geosequestration technology to communities, industry and governments worldwide," CO2CRC chief executive Peter Cook said.

"(It) has a very important role to play in demonstrating the technical and environmental feasibility of geosequestration to Australia and the world, and preparing the way for its widespread application," Mr Cook said.

The Australian Greens said the project is tiny in comparison to similar efforts overseas and would do little to improve understanding of carbon capture and storage.

Greens energy spokeswoman Christine Milne said it would not prove if carbon can be effectively and affordably captured at coal-fired power stations.

"The Otways project is government-funded PR for the coal sector and would be a perfect place to start for a government looking to find budget cuts," Senator Milne said.

The mining industry described the opening as significant in developing clean coal.

"There simply cannot be a global solution to managing climate change without a clean-coal strategy as part of a suite of policies to reduce greenhouse gas emissions, in an international response to managing climate change," Minerals Council of Australia chief executive Mitch Hooke said.

"For the foreseeable future, Australia and the world will continue to rely on coal and other fossil fuels to meet energy demand."