So argues a new report by Environment Victoria, which finds the Environment Protection Authority is letting the state's biggest carbon polluters off scot-free even though it has the power to make them cut their greenhouse gas emissions.

If the EPA continues to turn a blind eye, Victoria could ultimately fail to reach its goal of emitting no carbon dioxide by 2050, the report warns.

The 2050 target is integral to Victoria's plan to play its part to limit global warming to below two degrees of pre-industrial levels and avoid the worst impacts of climate change.

A series of five-yearly interim targets will also be set, however there is no regulatory mechanism to enforce them.

The EPA has the authority under the 2017 Climate Change Act to regulate carbon emissions, but doesn't use it.

The Act gives the EPA power "to regulate the emission and discharge of greenhouse gas substances to reduce harm to the environment".

However, the authority argued it needed the go-ahead from government to take on the state's major emitters.

The EPA is going through a $162.5 million taxpayer-funded overhaul.

"These reforms are much needed and very welcome, but climate change remains a massive blind spot for our environmental watchdog," Environment Victoria campaigns manager Nicholas Aberle said.

Dr Aberle said the EPA had said plenty in recent times about cracking down on the scourge of dumped oBikes, but was silent on "the biggest environmental challenge of our time".

"While the EPA currently fines Victorians for dumping litter, it lets large companies dump millions of tonnes of climate pollution into the atmosphere and get off scot-free," Dr Aberle said.

In its new report, Licence to Pollute, released on Tuesday, Environment Victoria argues the state will struggle to combat climate change unless the EPA takes a more assertive role in regulating emissions.

"Victoria's 10 biggest greenhouse gas emitters are responsible for about 60 million tonnes of climate pollution and face no restrictions or penalties for this damage," it said.

These include the Loy Yang A and B and Yallourn power stations in the Latrobe Valley, Esso gas plant in Longford, oil refineries in Geelong and Altona, the Alcoa aluminium smelter in Portland, Australian Paper's mill in Gippsland and Qenos' plastics plant in Altona.

The Hazelwood power station was Victoria's third-largest emitter until it closed in March.

The EPA's chief executive, Nial Finegan, defended the watchdog's inaction, saying it could not unilaterally crack down on carbon emissions without the Andrews government's say-so.

"The government committed ... to ensuring EPA has the appropriate instruments and tools to give effect to managing greenhouse gas emissions," Mr Finegan said. "However, it is clear that the decision on whether to give effect to that role sits with the government."

But Environment Victoria's report argues the authority's powers are already enshrined in legislation, and it should not wait to act.

It says the EPA could regulate emissions by imposing annual caps or by setting emissions intensity targets that would be tightened over time.

"The EPA is currently reviewing the licence conditions of Victoria's coal-burning power stations," Dr Aberle said.

"This is the perfect opportunity for the EPA to exercise its regulatory power to curb climate pollution from our state's biggest three climate polluters."

Environment and Climate Change Minister Lily D'Ambrosio said the government would set pledges for each sector of the economy to achieve interim emissions reduction targets.