EDEN, on the state's south coast, is set to be the first Australian town to be powered by a wood-fired electricity plant, despite concerns that burning trees could generate more greenhouse gas emissions than burning coal.

The woodchip company behind the plant, which is being considered by the NSW government, describes it as a renewable energy project that will make practical use of offcuts and sawdust from its existing mill.

Climate change activists display black balloons (representing pollution) outside the offices of the NSW government in Sydney to protest at its approval of a new woodchip fired power station in Eden. Credit:AFP

But it faces fierce opposition from sections of the local community which believe the plan will entrench logging in native forests and promote demand for woodchips.

Although the plant's developer, South East Fibre Exports, plans to phase in plantation wood, the majority of the 51,000 tonnes of fuel will still come from logging in native forests. When the role of the living trees as carbon sinks is factored in, emissions from the plant soar to up to four times that of a coal plant, campaigners argue.