Drax power company has said that it will pull out of the “White Rose” carbon capture scheme following recent changes to green energy policies by the government.
The firm said it would complete the feasibility study for the carbon capture and storage project, but would not invest any further once the study has ended.
The original project aimed to catch up to 90 per cent of emissions from a coal-fired power station and store them permanently under the North Sea.
In July 2014, Drax secured a €300m (£220m) grant from the EU to fund the initiative.
However, since the general election in May, ministers have announced curbs to solar and onshore wind subsidies, abandoned the Green Deal home energy saving loans scheme and axed plans to make all homes zero carbon by 2016.
The head of the Confederation of British Industry recently said that the changes sent a "worrying signal" to businesses that support green technology.
Drax blamed the "drastically different financial and regulatory environment" for their withdrawal from the White Rose project.
On the day of the announcement of the changes to the climate change levy, Drax - which has converted some of its coal-burning units at its North Yorkshire power station to biomass, making it the single biggest renewable generator in the UK - saw its share price fall 28 per cent.
The announcement comes after a report from Ernst & Young warned the UK was not only slipping down the rankings as an attractive place for renewables but policy changes could even "sour investor confidence" in other areas including nuclear, CCS and shale gas.
Drax Group operations director Pete Emery 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."
He said the company would focus its resources on what would deliver best value, in particular on working with the Government to explore the potential for converting a fourth coal unit to run on biomass.
Shadow energy secretary Lisa Nandy said: "With the only new nuclear power station delayed, new onshore wind farms being blocked, solar support being slashed by almost 90 per cent and the Government's carbon capture and storage strategy now unravelling too, ministers must come clean on whether they are abandoning all efforts to secure investment in clean energy in this country."
TUC general secretary Frances O'Grady said: "This is a very worrying development and shows how government back-pedalling on energy and climate policy is costing the UK jobs and investment.”
Recent figures have shown that renewable energy sources provided more than a quarter of the UK's electricity during Spring 2015.
The Committee on Climate Change has also written to ministers following the renewable subsidy cuts calling for replacement policies to be implemented in order to maintain Britain’s progress in promoting green energy sources.
Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.