The Government plan to close down 2,000 megawatts of Australia's dirtiest power stations has been scrapped.

In July 2011, the Government announced a plan to compensate power generation companies to close down some of their dirtiest coal-fired power stations.

But Resources Minister, Martin Ferguson, now says the talks have failed to agree on the appropriate level of compensation, and the negotiations have been cancelled.

Since the plan was announced, coal demand has increased while the carbon price has been lower than anticipated – increasing the asset value of the power stations.