UK wins battle over carbon capture billions: sources

BRUSSELS (Reuters) - European leaders agreed on Friday to put billions of euros of funds behind cutting-edge technology to trap and bury global warming gases underground, a key demand of Britain in climate talks, diplomats said.

Draft proposals to support Carbon Capture and Storage (CCS) to the tune of 200 million permits under the EU's flagship emissions trading scheme (ETS) were raised to 300 million, worth around 6 billion euros ($8 billion), said two sources in the negotiations.

"This is the bare minimum, but it will enable work to proceed. It won't allow us to test the full range of technology," British Liberal Chris Davies told Reuters"

CCS is seen as a potential silver bullet to curb emissions from coal-fired power plants, which are multiplying rapidly worldwide and threaten to heat the atmosphere to dangerous levels.

"(UK Prime Minister) Brown made clear that this was one of his priorities, not only because of the environment benefits, but also because it offers Europe the opportunity to lead the pack on this technology, securing jobs and growth," said a UK diplomat.

Other big backers of the technology in Europe include the Netherlands, which is close to depleted North Sea gas fields, and Poland and Germany, which rely heavily on coal.

"It's not going to finance all the pilot projects they might want, but it's sending the right signal to support CCS," said Societe Generale Coal Analyst Emmanuel Fages.

"They shouldn't give too much, there should be private money to compliment the public funds."

The cutting-edge technology is also seen as mankind's potential last hope to suck CO2 out of the atmosphere if politicians fail to agree ways of keeping temperature rises below the critical 2 degrees Celsius mark.

That threat loomed large on Friday after EU leaders watered down EU plans to cut carbon dioxide by a fifth by 2020, aiming to soften the shock for industry in a crisis.

While the techniques exist, utilities are reluctant to build CCS power stations without public funding because it adds about 1 billion euros to the cost of each plant.

The EU plans 10-12 demonstration projects by 2015 to kick start the industry.

(Reporting by Pete Harrison; Additional reporting by Michael Szabo in London)