PLANS to make Teesside the clean air capital of Europe have been dealt a severe blow by a Government decision to axe its £1 billion competition to develop carbon capture and storage (CCS) technology.

In an announcement to the London Stock Exchange, the Government said the £1 billion funding for the scheme - which aims to develop technology which can capture the polluting carbon emissions - was no longer available.

The decision means the competition, which had two bidders - the White Rose scheme in Yorkshire and the Peterhead scheme in Scotland, cannot proceed on its current basis, the Government said.

It also threatens Teesside Collective’s scheme to develop Europe’s first ever CCS network, that would capture air pollutants produced by the region’s heavy industry. Last week Tees MPs urged George Osborne to help fund the next stage of the revolutionary scheme.

Stockton north MP Alex Cunningham said today's move represented "another kicking for Teesside & our industrial scheme plan"

Carbon Capture and Storage Association chief executive Dr Luke Warren said cancelling the £1bn competition was "devastating".

He added: "Only six months ago, the Government's manifesto committed £1 billion of funding for CCS. Moving the goalposts just at the time when a four-year competition is about to conclude is an appalling way to do business.

"This announcement is a real blow to confidence for companies investing in CCS. We call on the Government to come forward - as a matter of urgency - with their plans for CCS as this technology is critical for the UK's economic, industrial and climate policies.

"Without concrete Government support for CCS, the UK will lose the opportunity for cost-effective decarbonisation."

Neil Kenley, Director of Business Investment at Tees Valley Unlimited, said on behalf of Teesside Collective: “With carbon permits expected to quadruple in price by 2030, CCS is also the only sure fire way of retaining a competitive industrial base in the UK. Exempting energy intensives from climate change policy costs is helpful, but can only ever be a sticking plaster for reducing uncertainty, in the face of the challenge of climate change.

“The Committee on Climate Change’s projections and those of Energy Technology Institute are clear – CCS halves the cost of the UK meeting its binding carbon targets, by decarbonising fossil fuel power generation and energy-intensive industries like those in Teesside.

“Teesside is a hub for the UK industrial gas network. Teesside Collective is working with the Government, with other local energy intensives and is supporting partner clusters up and down the east coast.

“We’re developing our plans for the clean-up of the UK’s energy intensive industries, preserving and creating tens of thousands of jobs, as well as providing cost effective reduction of tens of millions of tonnes of carbon each year."

Shadow energy secretary Lisa Nandy said: "Carbon Capture and Storage offers huge economic opportunities for Britain, and it could be a crucial tool for sustaining many of our most important industries in the years ahead.

"Year after year the Prime Minister has personally promised to support CCS, so this is a huge betrayal for all of the communities who could have benefited so much from this cutting-edge technology."

EEF, the manufacturers' organisation, warned that for many sectors such as steel and cement there was no other way to cut emissions from industrial processes than capturing and storing the carbon.

Claire Jakobsson, the organisation's head of climate and environment policy, said: "The cuts to the UK's carbon capture and storage (CCS) funding are extremely disappointing. Whilst we understand that Government has had to make some extremely tough decisions, this one is not in the long term interests of the UK economy or energy consumers.

"CCS has the potential to halve the costs of decarbonising the UK economy by 2050, which amounts to £32 billion a year by 2050.

"In choosing to save a relatively small sum of taxpayer money in 2015, Government is unnecessarily committing vast amount of future energy consumers' money."

The White Rose project, near Selby, North Yorkshire, involved a new coal-fired power station fitted with technology to capture 90 per cent of its carbon emissions and develop a pipeline to storage under the North Sea.

The scheme's backers say it would generate 1,000 construction jobs as the power plant was being built, and 1,000 for the construction of the pipeline, as well as around 100 permanent jobs, and would power 630,000 homes with low carbon electricity.