America will overtake Europe in developing technology to reduce carbon, reckons Lewis Gillies, chief executive of Hydrogen Energy. The Obama Administration will “photocopy” Calfornia’s cutting-edge environmental legislation and make it the standard across the country — and “that will push Europe to move its ETS forward”, Mr Gillies said.

Hydrogen Energy, a joint venture between BP and Rio Tinto, is investing in two $2 billion (£1.3 billion) power schemes to capture carbon dioxide and inject it into old oilfields. One project is in Abu Dhabi, backed by the Emirates Government. The other is in Bakersfield, California. This will extract CO2 from petroleum coke (the residue from a local BP refinery) and inject it into an old Californian oilfield, a process that will enhance oil recovery and offset some of the additional cost of the plant. The extraction of CO2 creates a pure hydrogen fuel that powers a 400 megawatt electricity generator.

BP abandoned efforts to build a carbon capture and storage (CCS) plant in Britain more than a year ago when it became clear that the Government was not ready to give a long-term commitment to back CCS technology. The Government also preferred to back a specific form of CCS, favouring so-called post-combustion technology, whereas BP is putting its weight behind pre-combustion technology. In post-combustion CCS, the emissions from the power generator are chemically treated to capture carbon dioxide, much as sulphur dioxide is removed from the flues of many coal-fired generators. Pre-combustion extracts CO2 from the feedstock coal by transforming it into synthetic gas.

The Government is taking the wrong approach to CCS, argues Ian Temperton, managing director of Climate Change Capital. “The Government is trying to buy a power station; there is a procurement process. Our view is they should instead establish an incentive process to help to repay the capital cost and operating cost over time.”

The Government has done a partial U-turn, having decided to back more than one demonstration plant and different technologies, but it is still in the procurement game. Hydrogen Energy wants to build CCS plants in Europe, taking advantage of BP’s position in the North Sea, where it has interests in hundreds of oilfields that have potential as carbon dioxide storage reservoirs.

For Hydrogen Energy, CCS is a fuel business, not a power-station clean-up business. “This technology is beyond the industry’s capability. We will take a fossil fuel, convert it into hydrogen, store the carbon dioxide and sell hydrogen to the power industry. We will sell carbon-free fuel at the door of the power plant,” Mr Gillies said.

National Grid, owner of Britain’s gas pipeline and power grid, is investigating the feasibility of using old gas pipelines to create a carbon dioxide transport network that would move CO2 from clusters of power stations in the Thames Estuary and the Humber to North Sea oil and gasfields.

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