The French overseas territories minister, Victorin Lurel, says the government will back plans by the nickel miner SLN to build a new coal-powered plant in New Caledonia's capital.
Environmentalists had called for other sources of energy to be exploited, but Mr Lurel says coal is the most economical and most efficient source.
The minister says it's up to the operators to pay compensation for the CO2 emissions.
There had earlier been plans to use gas for the nickel plant which is currently running at a loss.
To reduce pollution, the mayor of Noumea had been calling for the use of low-sulphur fuel to run the power plant.
