The energy secretary Ed Davey has opened a new biomass power plant at Drax power station in North Yorkshire.
Drax's owners plan to spend £700m converting three of its six current coal-fired generating units to biomass by 2016.
Mr Davey also announced government investment in a carbon capture scheme.
Drax claimed that the biomass generator, which generates electricity from wood pulp, produced 80% CO2 emissions compared to burning coal.
It said most of the fuel, which is burnt in the form of pellets, is from forests in the United States.
Mr Davey announced the government was providing funding towards developing a £2bn carbon capture scheme based at Drax.
The White Rose Carbon Capture and Storage project plans to build a new coal powered power station that would have its CO2 emissions transported by a pipeline for storage underneath the North Sea.