Brown to stake £600m on clean power

Chanellor Gordon Brown plans to invest up to £600m to develop 'carbon capture' technology to transform coal into a clean fuel by piping harmful extracts into caverns under the North Sea.

He wants Britain to take the lead in capturing climate-changing carbon dioxide and believes there is a multi-billion pound market in India and the Far East for UK expertise.
The Treasury has asked San Francisco-based engineer PB Power to investigate the project, find suitable potential partners and recommend whether investment is worthwhile.

A decision is expected by the end of the year. Financial Mail understands the Government is impressed with a plan by Centrica, owner of British Gas, to build a 'clean' coal-powered station in Teesside. This would be the first new coal-fired power station in the UK since 1974.

PB Power is also looking at BP's proposed plant at Peterhead, Aberdeenshire, and plans by Eon, owner of Powergen. The companies are keen to work on the new technology, but they regard the financial risks as huge - no one has yet built a largescale-carbon capture plant - so they will not go ahead without Government backing.

Centrica believes about £300m per plant is necessary. But the Government is unlikely to pay a one-off sum. Instead, it may offer grants, capital allowances or exemptions from the need to provide a portion of electricity from renewable sources.

The market for environmental goods and services is predicted to grow rapidly. Oil company Shell expects demand to rise by 21% this year and to be worth £2.8bn to UK business by 2008.

• Brown also has Britain's throwaway culture in his sights as he prepares to leave the Treasury, writes Dan Atkinson. Next week's Budget, widely expected to be his last, is likely to see a steep increase in landfill tax as the Chancellor tries to wean people and businesses away from waste disposal and towards recycling.

The Chancellor is committed to raising the tax, paid by waste disposal operators, from the current £21 a tonne to £24 in April and £35 'in the medium to long term'. But he is expected to use his Budget on March 21 to announce steeper increases from next year.

This would help meet his aim, stated in December, to encourage 'greater diversion of waste from landfill and more sustainable wastemanagement options'.

Raising the level of landfill tax is likely to be one of a number of environmental measures from the Chancellor as he seeks to burnish his green credentials. Other moves include encouraging the use of environmentally friendly fuels and tax breaks for the installation of wind turbines and other domestic powergeneration equipment.