So, unless the cost of CO2 emissions on the European Union's emissions trading scheme more than doubles, or the cost of the technology halves, the taxpayer will have to pay the difference if carbon capture and storage (CCS) is to play a role in Britain's climate change fight.

"It's a really expensive thing to do and unless there is some sort of incentive for them to do this then what reason have they got to install these facilities?" one of the report authors Barry Ladbrook told Reuters. "Something like a carbon price is one of the things that would make it more attractive."

But permits to emit CO2 are trading at around 16 euros per tonne, even for the much costlier second phase of the EU's emissions trading scheme.

Even that scheme runs out in 2012, with no clear picture of what, if anything, will dicate the cost of carbon beyond then.

DECISION TIME

Energy companies will not voluntarily foot the bill for carbon abatement, so governments need to decide quickly whether they want to support it, companies say.

"It does depend on society and government putting a value, and a sufficient value, to warrant the technology on reducing emissions of carbon dioxide," a spokesman for oil major BP told Reuters.

"It's not something that would be done without a value put on it because it has no inherent value in its own right...It does require support, fiscal support," he said.

BP and its partner Scottish and Southern Energy have a plan to bury the CO2 created by the Peterhead power plant in Scotland in its depleted Miller oil and gas field under the North Sea.

BP estimates that pumping the CO2 from Peterhead into the ageing field could boost recoverable oil reserves by up to 60 million barrels, making that project more attractive.

But it still will not go ahead without financial backing from government.

"There has to be a value put on it to make the project economic and for us to take part in the project," the spokesman said. "It has to be for a government to decide whether that's something that it wants to put its money in to."

Another British company looking at CCS projects is Centrica , the owner of the country's largest energy supplier British Gas.

But emissions prices are not high enough, so a bigger financial incentive is needed, according to Jake Ulrich, the managing director of Centrica's generation and upstream gas arm

"I would expect, if not the EU, then some of the individual state governments to offer some incentives to early projects, because it will be risky," he told Reuters.

"If we had a policy framework that would establish a real value for carbon then that would be enough to move forward, but that's a big if... Clearly at less than 20 euros per ton that's not going to be enough of a driver to move forward with these technologies."