The government was forced to reassure the carbon capture and storage industry on Monday after comments from the Treasury appeared to cast doubt on the future of £1bn funding for the technology.

Danny Alexander appeared to suggest money set aside for CCS could be subsumed into general infrastructure spending. But the Department of Energy and Climate Change moved to calm fears, insisting £1bn was still available from the government to fund pioneering CCS projects.

The comments by Danny Alexander, the chief secretary to the Treasury and Liberal Democrat MP, came as energy-intensive and high carbon emitting industries looked forward to finding out what exemptions they could expect from the government's carbon regulations. Details of the concessions – which come despite a massive fall in the price of carbon permits – are expected to be unveiled on Tuesday.

The £1bn fund for CCS, to be awarded to the winner of a competition that has been running for nearly five years, is considered the last hope for developing CCS technology in the UK as promises of other government assistance – such as a levy on energy bills to subsidise the high initial costs of the low-carbon technology – were withdrawn.

Several of the highest profile CCS projects have already been scrapped, including the Longannet plant which had been frontrunner in the competition, leaving a handful of less advanced proposals still under consideration.

Alexander had told the Today programme that the funds set aside for CCS could be spent instead as part of a general infrastructure fund, which would devote government assistance to a wide range of sectors and technologies from transport to energy.

CCS was once seen as one of the new low-carbon technologies in which the UK could be a pioneer. There are potential carbon dioxide storage areas in depleted oil fields under the North Sea that are likely to be geologically suitable, and the UK already has expertise in many of the component technologies needed in the oil and gas industry. But high-profile companies such as BP and E.ON dropped their plans, leading to a loss of confidence in the industry.

Source: Fiona Harvey, environment correspondent, guardian.co.uk, Monday 28 November 2011 11.54 GMT

more