Forestry Tasmania is pressing ahead with plans to build a biomass plant, even though native forest woodchips are not considered a renewable energy fuel under the carbon tax plan.

Power stations which burn native timber will no longer qualify for renewable energy subsidies under the scheme.

Environment Tasmania says it removes what has been a “perverse incentive” for logging native forests.

Spokesman, Phill Pullinger, says the AU$948m (US$994m) biodiversity fund and carbon farming initiative would also help protect the state’s native forests and ecosystems.

The Tasmanian Greens leader Nick McKim has applauded the decision.

“This is a big step forward towards valuing our forests properly,” he said.

But it has infuriated state-owned Forestry Tasmania which is trying to develop a biomass plant in the Huon Valley in the south.