£1bn flagship green scheme is cancelled

Britain's efforts to fight climate change suffered an embarrassing setback yesterday when the Government abandoned plans for the UK's first coal-fired power plant fitted with technology to capture and store carbon emissions.

The flagship project at Longannet, the huge power station on the Firth of Forth, fell apart after the consortium planning to build it, headed by ScottishPower and including Shell and the National Grid, demanded considerably more investment than the £1bn which the Government had set aside for the scheme.

The project's collapse is a blow to Britain's declared aim of being the first country with a full-scale generating plant employing carbon capture and storage (CCS) – a complex new technology which takes CO2 out of power station waste gases, liquefies it, and buries it deep underground, or in this case under the North Sea. CCS is seen as a crucial technique in reducing carbon emissions, which Britain has pledged to cut by 80 per cent by 2050.

The Energy Secretary, Chris Huhne, was quick to point out yesterday that CCS remained a key part of Britain's energy strategy and that the £1bn would remain available for other CCS projects.

The funding had been exempted by the Chancellor, George Osborne, from his cuts programme last year, and the collapse of the deal with ScottishPower is not seen as the Government's fault, but the delay in CCS coming on stream will add to the impression that the UK is slowing down on its efforts to tackle climate change in a time of recession.

Mr Osborne told the Tory conference that Britain would go no slower than its European competitors in reducing its CO2 emissions – but no faster.

"This news is massively disappointing and threatens the UK's ambition to be at the forefront of developing this new technology," said Richard Dixon, director of WWF Scotland. "If technical and economic hurdles can be overcome CCS has the potential to help reduce emissions at thousands of coal power stations around the world. However, almost four years after launching its funding competition, plans for CCS in the UK have descended into farce. Four years have effectively been wasted in the battle to tackle climate change."

Mr Huhne said yesterday: "£1bn is enough to demonstrate this vital new technology in the UK, but it's got to be spent in the most effective way. Despite everyone working extremely hard, we've not been able to reach a satisfactory deal for a project at Longannet at this time, so we've taken the decision to pursue alternative projects."

The Government has seven more potential CCS projects lined up, including new gas-fired as well as coal-fired power stations. It will put these forward for large European Union grants to be awarded next year. The projects include new plants at Drax and Don Valley in Yorkshire, and at Peterhead in Scotland.

"It's disappointing that the CCS project at Longannet won't go ahead, but by retaining the £1bn the Government promised for CCS, it can now get our programme back on track," said Matthew Spencer, director of the environmental think-tank Green Alliance.