Updated: Government predicts UK can clean up with clean coal

The government has today released its long anticipated consultation on the regulatory and financial framework to support a new generation of four carbon capture and storage (CCS) plants, promising that the early adoption of the technology will deliver a major boost to the economy.

The 100-page document, which is open for consultation until 9 September, sets out the proposed regulations and incentive schemes required to make good on energy and climate change secretary Ed Miliband's recent pledge that no new coal plants will be built in the UK without CCS systems fitted.

The consultation reiterates Miliband's commitment that all new coal plants must demonstrate CCS on at least 300Mw of their capacity from their first day of operation and must scale up the system to full capacity within five years of the technology being deemed as proven.

It also outlines proposals for the Environment Agency to independently assess the status of the technology in 2020, at which point it is hoped that four successful pilot projects will have demonstrated that CCS is technically feasible at large scale.

The original proposals had been criticised by green groups who argued that the government would not be able to shut down working coal-fire plants in the event that the technology fails to work.

But the consultation attempts to alleviate some of these concerns, proposing that a limit on running hours, an annual cap on emissions, or a performance standard requiring limits on emissions could be imposed if CCS is not established by 2020.

Lord Chris Smith, chairman of the Environment Agency, welcomed the watchdog's potential role in enforcing the new regulations and pledged to work closely with the government to ensure the legislation proves effective. "The Environment Agency recognise that there are still some significant issues to address including contingency plans should it take longer than anticipated to prove the technology," he said. "We will be working with the Department for Energy and Climate Change to ensure such obstacles are overcome."

Miliband said the new regulatory framework would be "the most environmentally ambitious of any country in the world", and would help to develop a major new industry for the UK capable of supporting jobs and underpinning a number of low-carbon industrial hubs across the country.

In addition to proposing new regulations, the consultation also sets out plans for financing four demonstration projects through a combination of government investment and charges on energy firms.

It says that while the government will press ahead with is £1bn competition to build one demonstration project, future demonstration projects will either be funded through a subsidy mechanism similar to the Renewables Obligation or a straight levy on energy firms. Both options are likely to lead to higher energy bills as utilities seek to recoup the cost of any extra charges.

The industry is likely to support proposals for a levy, according to Jeff Chapman, chief executive of the Carbon Capture and Storage Association. "The levy is a good idea," he said. "We would be happy to work with it and would also like to see it extended so that it goes beyond covering just the first wave of four demonstration projects."

Stephen Hale, director of sustainable business group the Green Alliance, said the extent to which the proposed legislation is adopted would provide a "litmus test" of the government's commitment to tackling climate change.

"Britain's coal policy is still on a knife edge," he said. "Ed Miliband has sketched out a tantalising picture of a dramatic new coal policy. By October, he must deliver a definitive policy that secures the multi-billion pound in vestment we need for carbon capture and storage technology."

The consultation was released alongside a report from engineering consultancy AEA, which predicted clean-coal technologies could provide an economic boost of between £2bn and £4bn a year by 2030, creating between 30,000 and 60,000 jobs in the process.

The news was welcomed by TUC general secretary Brendan Barber who praised the consultation as "a bold vision for clean coal that business, unions and communities can rally around".

"Today's announcement is a real breakthrough for the future of clean-coal technology in the UK and will create tens of thousands of skilled manufacturing jobs," he added. "The TUC has long-argued that investment in clean-coal technology has a crucial role to play in guaranteeing energy security and easing the transition to a low-carbon economy.