NSW should place a cap on the amount of thermal coal it can mine and plan an orderly exit of the industry within a decade to do its bit to avoid catastrophic climate change, NSW Greens say.

The party plans to introduce a bill to parliament limiting mining of the coal used in power stations to 1 billion tonnes – or half the projected output for the coming decade – with companies allowed to bid for mining rights.

"If we do not begin a rapid phase-out of coal, then our planet will suffer runaway climate change with catastrophic consequences," said Jeremy Buckingham, the Greens mining spokesman. "Burning coal is simply incompatible with protecting the climate." 

Mr Buckingham said the auction process could generate $7 billion over the decade that makes up for the royalty losses to the Treasury and helps smooth an "inevitable" end to coal. Coking coal used for steel-making would not be affected by the scheme.

The plan will be launched on Friday with federal Greens leader Richard di Natale, and comes as the Turnbull  government has raised the prospect of subsidising new lower-emissions coal-fired power plants to ease the country's energy security woes. NSW gets about 80 per cent of its electricity from coal.

Don Harwin, NSW energy minister, said the Greens' plan "would threaten our energy security and our communities". 

"There's a sensible way to address climate change whilst creating new jobs, and that's our approach," he said.

The Greens point to the commitment of the NSW government under former Premier Mike Baird for the state to meet net-zero emissions by 2050, and the national goal of cutting carbon emissions by at least 26 per cent on 2005-levels by 2030.

"We are confident a ten-year phase-out of coal will resonate with the majority of voters who are desperate for politician to act meaningfully on climate change," Mr Buckingham said.

Fairfax Media sought comment from Labor.