Only those plants which could remove carbon dioxide after coal is burnt in power plants and then safely bury it underground will be in the running for the carbon capture and storage (CCS) prize.

Unless rival project backers can persuade the government to change its mind over the next few weeks, proposals for removing the carbon dioxide before fuels are burnt using IGCC technology are unlikely to go ahead because the pioneer projects are likely to be expensive.

The UK arm of German energy giant E.ON, had hoped to win support for its CCS project at Killingholme in northern England. But the government's rejection of any pre-combustion project is the end of it.

"It does effectively kill off the Killingholme project," a spokesman for E.ON UK said.

E.ON is still in the running with its plan for a "clean" coal plant at its Kingsnorth power station in Kent, which was invaded this week by environmentalists opposing plans for a new coal-fired plant.

Centrica has not yet ditched its plan to build a billion-pound coal plant in northeast England to remove the gas primarily responsible for climate change and then stash in underground before burning the coal.

But a spokesman for Britain's biggest domestic energy supplier said it would be difficult to justify without government aid.

"The government decision does place a question mark over the economics of our project at Teesside," a spokesman for the company said.

PROFITABLE EXPORT?

Centrica said higher carbon emissions prices could spur the development of cleaner coal technologies, the first of which are likely to be prohibitively expensive.

But carbon prices are unlikely to be high enough under the European Union's current emissions trading scheme running to 2012 to make it worthwhile spending hundreds of millions of on cleaner coal burning.

By then it will be too late to build even one in the UK in time to meet the EU target of having 10 running by 2015.

The British government sees CCS as a potentially profitable export if Britain can develop a commercially viable plant before anyone else, and is offering the CCS prize to get companies to build a full scale demonstration plant.

But the government thinks removing the carbon from the smoke emitted by coal furnaces is more useful because it can be fitted to existing plants in places like China, which is building more than one coal fired plant a week.

Critics say that is short sighted -- Britain needs to plug its own looming generation gap with low-carbon technologies as most of its old coal plants are closed over the next decade.

IGCC must get government support so suppliers can build new coal and gas fired plants fitted with it, to bury the dangerous gas deep underground, they say.