DRAX Power Station has announced it will not provide further funding for a major energy project.

The station was among 12 projects applying for a share of the EU's €4.5 billion fund to support Carbon Capture and Storage (CCS), which strips carbon dioxide from burning coal and secures it underground, to reduce emissions from the plant.

On Friday, Drax announced it "remained committed" to a feasibility and technology development project over CCS, but would not invest further once this was complete. The plant will also withdraw as a partner of Capture Power Ltd - the group which developed the CCS project.

Pete Emery, Drax Group operations director, said: "We remain fully committed to completing what we’ve signed up to – the completion of a study into the feasibility and development of world leading technology that could result in dramatic reductions in carbon emissions produced by power stations and heavy industry.

"We are confident the technology we have developed has real potential, but have reluctantly taken a decision not to invest any further in the development of this project. The decision is based purely on a drastically different financial and regulatory environment and we must put the interests of the business and our shareholders first."

Kevin Coyne from Unite said: "This is a disaster. The technology is proven and already in use in Canada and Sweden. It could have been a blueprint for similar projects elsewhere in the UK.

"Ministers need to step up to the plate with public investment to ensure that the £1bn White Rose carbon capture project comes to fruition, otherwise the massive coal reserves that the UK is sitting on will remain untapped."

Linda McAvan, Labour MEP for Yorkshire and the Humber, said the news was “a real blow for our region, for the fight against climate change and for cleaner energy”, and blamed “government dithering and its failure to back the project” as the reason for the changes.

The feasibility and technology development project is due to run for another six to 12 months, and Drax said it would continue to make the site of the proposed CCS plant and the power station's infrastructure available to Capture Power should it go forward.

Mr Emery said: "We will focus our resources on the areas which we can deliver best value, particularly working with Government to explore the potential for converting a fourth generating unit to run on sustainable biomass.

"Drax still believes this project has great potential and we have announced that the site at the Drax Power Plant, along with our existing infrastructure remain available for the project to be built."

Leigh Hackett, CEO of Capture Power, said Drax's decision to withdraw was "disappointing", but the project would continue, and the organisation was determined "to encourage investment in new, low carbon generation".

A spokesman for the union Unite said the Government should use public money to continue funding the project, which would make use of untapped coal reserves.