Britain has scrapped plans to spend up to STG1 billion ($A2.08 billion) to help commercialise the technology for capturing carbon dioxide emissions from power plants and storing them underground, putting two major projects at risk of being cancelled.
The announcement on Wednesday comes just days before negotiators from more than 190 countries are due to meet in Paris to thrash out a global deal to cut greenhouse gas emissions blamed for rising temperatures.
"Following the chancellor's autumn statement, HM Government confirms that the STG1 billion ring-fenced capital budget for the Carbon Capture and Storage (CCS) competition is no longer available," the government said.
Britain has two potential large-scale CCS schemes, one being developed at an existing gas-fired plant in Peterhead, Scotland, by Shell and utility SSE.
A second, White Rose, is being worked on at the UK's biggest coal-fired power station by the plant operator Drax and engineering consortium Capture Power, which includes GE and BOC, part of the Linde Group.
"It is too early to make any definitive decisions about the future of the White Rose CCS Project. However, it is difficult to imagine its continuation in the absence of crucial government support," Leigh Hackett, chief executive of Capture Power, said in a statement.
Drax said in September it would not invest further in the project once the feasibility study is completed.
Shell and SSE both said in separate statements the decision was disappointing and represented a missed opportunity for the country.
"Without that funding, we no longer see a future for the Peterhead project in the near term," a spokesman for Shell said.
The International Energy Agency said CCS could contribute one sixth of the global emission reductions scientists say are needed by 2050 to stave off the worst effects of climate change such as drought, sea level rises and flooding.
Britain had previously viewed CCS as a vital tool to help it meet its legally binding target to cut emissions by 80 per cent on 1990 levels by 2050.
But so far CCS has failed to live up to early hopes of its widespread adoption.
After many years of research Canadian utility Saskatchewan Power opened the world's first coal-fired power plant retrofitted with CCS last year, but European utilities have struggled.
