A Supreme Court challenge has been launched on the Victorian EPA's review of coal-fired power stations in Latrobe Valley. 

Victoria's climate change act is facing its first major legal test in the state's highest court, with Environment Victoria pushing to overturn licensing conditions of coal-fired power stations.

The 2017 legislation requires all government decision-makers to have regard for climate change.

The state’s environmental watchdog launched a review in 2018 of the operating conditions of the three brown-coal-fired power stations in the Latrobe Valley - Loy Yang A, Loy Yang B, and Yallourn.

It was part of the Environmental Protection Authority's (EPA) routine program of reviewing licences to ensure power stations keep up with science and community expectations.

It led the EPA to set limits on emissions of fine and coarse particulate matter and mercury, and strengthen wastewater and landfill limits.

However, it did not impose a limit on how much greenhouse gases the stations could emit. 

The judicial review brought by Environment Victoria includes Latrobe Valley power station operators AGL, Energy Australia, and Alinta Energy, and focused its challenge on the piece of the legislation that held “decision-makers must have regard for climate change”.

Environment Victoria argued that the EPA did not regard the power stations' contributions to climate change because it did not limit greenhouse gas emissions. 

Lawyers representing the power stations argued that because the authority had started the review itself, it did not have to make any mandatory considerations.  

“We respectfully submit that the plaintiff has over-reached,” the lawyer representing Loy Yang power station, Dr Matthew Collins, told the court. 

Justice James Gorton is expected to deliver a decision on the matter in the coming weeks.