Wood heaters will be banned in the new residential suburbs of the Molonglo Valley, with the government fearing the major development may threaten the ACT's air quality.
The heaters will be prohibited in Coombs and all future suburbs in Molonglo Valley, but the existing suburb of Wright will be exempt.
The decision follows the release of the annual Air Quality Report for 2011, which identifies domestic wood heaters as the biggest source of air pollution in the ACT.
Wood heaters are already banned in Dunlop and East O'Malley, according to Environment Minister Simon Corbell.
''We know that wood smoke can be a problem in the ACT which is why the government recently launched the ''Burn Right Tonight'' campaign to raise the public awareness of correct wood heater operation,'' he said.
But the ban has been criticised by Opposition Leader Zed Seselja, who fears the government will extend the prohibition right across the ACT.
Mr Seselja believes the reduction of pollution is being achieved by innovation and the development of newer, cleaner wood heating technology.
''Electricity prices are going through the roof and people are responding with things like wood heaters, and now the government is banning them as well,'' Mr Seselja said.
''I don't think it's the right way to go, I think the industry is responding with cleaner burning wood heaters,'' he said.
The air quality report identified four breaches of air quality standards in the colder months of May and July last year, but Mr Corbell said the report highlighted an excellent overall quality of air in Canberra.
Greens environment spokesman Shane Rattenbury welcomed the government's decision to ban wood heaters in the Molonglo Valley.
But Mr Rattenbury described it as a first step, and urged the government to do more to tackle wood heater pollution.
''The government knows that wood smoke pollution has a detrimental impact on people's health and Canberra's environment, which is why it needs to go further than it has,' Mr Rattenbury said.
''We need to take action on wood smoke all parts of Canberra, not just in the new Molonglo developments. Tuggeranong Valley remains an area of particular concern,'' he said.
The government and ActewAGL currently run a wood heater replacement program that gives residents a rebate of up to $800 to make the switch to gas-flued systems.
The Greens have proposed improvements to the program alongside legislation that would introduce stricter efficiency and emissions standards for wood heaters in the ACT.
Mr Rattenbury said the Greens had also proposed ways of better enforcing wood heater use, and ways to phase out older, dirtier wood heaters.