ENVIRONMENTAL campaigners have claimed a "massive victory" after an energy firm that wanted to set coal alight underneath the Firth of Forth axed the plans.

Cluff Natural Resources, which wanted to set up an underground coal gasification (UCG) plant at Kincardine which would have seen coal reserves ignited and gas siphoned off to the surface, said it was no longer spending money on the project.

It blamed a Scottish Government moratorium for the move and will instead focus on England where it believes the "political situation is more favourable."

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Lang Banks, director of WWF Scotland, who opposed the plans, said: "This news represents a massive victory for all those who have campaigned long and hard to halt Cluff’s daft coal-burning plans. However, we’ll only be satisfied when the company hands back it licences.

"Burning coal under the sea should have no place in Scotland’s energy future, which is why the Scottish Government was right to extend its moratorium on unconventional gas extraction to include underground coal gasification. We hope it time this moratorium will become an outright ban."

Ministers had for months resisted pressure to include UCG in a moratorium on fracking and coal bed methane extraction, which it imposed a year ago, and had initially assured Cluff that its plans would be unaffected.

Alex Salmond previously spoke of the potential of the technique while a statement in support of UCG was recently deleted from the Scottish Government website. The government did not include UCG in a public health impact assessment on unconventional oil and gas which will help decide whether a moratorium on fracking is lifted.

Energy minister Fergus Ewing agreed to impose a separate UCG moratorium in October, after a campaign group within his own party was established to call for the move and with a divisive debate on unconventional energy at the SNP conference looming. Hundreds of people took part in a protest against UCG, linking arms across the Forth Road Bridge, three months ago.

The Scottish Conservatives said the SNP had put politics ahead of the potential to create thousands of jobs, boost the Scottish economy and create a secure supply of energy. A report commissioned by Cluff and published last year had claimed that pioneering the technology in Scotland could have created £13bn for the UK, with almost half of it being retained in Scotland.

Murdo Fraser, the party's energy spokesman, said: "In light of the current political circumstances Cluff Natural Resources have decided to invest in other parts of the UK which will be bitterly disappointing for the Scottish economy, given the number of jobs which could have been created."

Sarah Boyack, Scottish Labour's environmental justice spokeswoman said it was 'very telling' Mr Cluff's firm said in its statement that it had received assurances from ministers and remained confident the moratorium would be lifted. She called for full transparency on the government's dealings with such companies.

A government spokesman said: "The Scottish Government has adopted a cautious, evidence-based approach to underground coal gasification and, as such, announced a moratorium in October to allow necessary time for full and careful consideration of the potential impacts of this new technology."