The Australian Government will contribute $125 million towards the projects from its Low Emissions Technology Demonstration Fund, (LETDF), while the Queensland government will supply the remaining $105 million.
The Fairview Power Project would receive $75 million from the LETDF fund to build a new power plant at Injune, near Roma.
The project involves extracting methane from coal seams located too far underground to be mined. The methane will be burnt in a 100-mega watt power station and the carbon dioxide emissions will be captured and injected back into the coal seam.
With a total life-cycle cost of $445 million, the project is expected to begin construction in April next year and be completed by 2015.
The Australian Government will also provide $50 million from LETDF to CS Energy's world-first Oxy-Fuel Demonstration Project to retrofit the Callide power plant.
Due for completion by 2015, this $188 million demonstration project involves burning coal in an oxygen-rich environment to produce electricity. The resulting exhaust gases, which include a high concentration of carbon dioxide, can be captured and stored underground.
Macfarlane said the two projects would be a significant boost for the Australian Government’s clean energy.
"Both projects, together worth $633 million, will demonstrate new technologies that will lead to a lower emissions future from Australia's coal resources," Mr Macfarlane said.
This is the second announcement so far through the LETDF, with Commonwealth funding totalling $125 million announced for two Victorian alternative energy projects last week.
A third project, known as the Hazelwood 2030, will also received some of the funding to demonstrate the capture of carbon dioxide from an existing coal-fired power plant.
The Cooperative Research Centre for Greenhouse Gas Technologies (CO2CRC), which assisted in the research and development of the three projects, welcomed the government's support.
“All three projects will lead the way in demonstrating technologies that will make deep cuts into greenhouse gas emissions, while still using fossil fuels,” chief executive Dr Peter Cook said.
