The Government has announced it is axing its £1 billion competition to develop "carbon capture and storage" technology on power stations.

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 from fossil fuel power stations - 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.

Carbon Capture and Storage Association chief executive Dr Luke Warren said the announcement 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."

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% 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.

Drax power company announced in September it was pulling out of the White Rose scheme. It said it would complete the feasibility study but would not invest any further in the project, to be built next to the Drax power station..

Drax blamed the "drastically different financial and regulatory environment" which has seen the wholesale price of electricity drop and moves by the Government to rein back support for low carbon technology.

At Peterhead, Scotland, Shell and SSE were looking to develop a project to capture up to 15 million tonnes of carbon dioxide emissions and transport them by pipeline offshore for long-term storage deep under the North Sea.

It was estimated that around 600 jobs would be created at the height of the construction phase.

A Shell spokesman said: "Shell is disappointed at the withdrawal of funding for the CCS Commercialisation Competition, in which our Peterhead CCS project was one of the final contenders.

"We have worked tirelessly over the last two years to progress our plans for this project. It has the potential to bring huge value to the UK, both in terms of immediate emissions reductions and developing knowledge for the benefit of a wider industry.

"Government funding to support this world-first demonstration project, through the competition, was important to achieving the aim of making the technology commercially viable in the shortest possible time.

"While we acknowledge that this decision has been made in the context of a difficult spending review, without that funding, we no longer see a future for the Peterhead project in the near term.

"Shell remains committed to CCS - as our involvement in demonstration projects in other parts of the world shows - and view it as an important part of a low-carbon energy future."

A spokesman for SSE said: "Whilst SSE appreciates that being in government involves taking difficult decisions, it is extremely disappointed by today's announcement that the government is removing all committed public support for the demonstration of Carbon Capture and Storage (CCS) in the UK.

"SSE believes this decision represents a significant missed opportunity for the UK."

Doug Parr, head of policy at Greenpeace, said the Treasury had scrapped the "centrepiece" of the Prime Minister's bid to cut carbon from the energy sector as he headed off to crucial international talks on tackling climate change in Paris.

"With a threadbare policy and no cash in place for CCS, George Osborne's dash for gas is seriously eroding David Cameron's plan.

"This is yet another clear-cut example of the Government's incoherent energy policy being played out.

"We need the Government to commit to clean, renewable energy - it's competitive, home grown and creates jobs. This is a plan that makes economic and environmental sense," he said.