EU agrees to split billions for green power, coal

An European Union flag flutters on the day marking the start of Spain's presidency of the EU, in the Andalusian capital of Seville January 8, 2010.

BRUSSELS (Reuters) - European nations agreed on Tuesday how they would carve up billions of euros of European Union funding to help develop advanced renewable power or carbon-trapping technology.

The issue has divided the EU's 27 members for more than a year, and Tuesday's vote was seen as the last chance to secure a deal that will help the EU in its race against China and the United States to dominate low carbon technologies.

Germany, Italy and Britain have been among the biggest critics of the plan, demanding more say in how the money is allocated and disbursed. Industry feared the stand-off might have led to the scheme being scrapped completely.

"The proposal has gone through and this is by far the biggest support mechanism in the world for clean coal," said British politician Chris Davies, who designed the scheme.

The funding was agreed in 2008 to support Carbon Capture and Storage (CCS) technology -- a method of burying harmful gases, which many power producers say is a potential silver bullet to curb climate-warming emissions from coal.

But additional costs of around 1 billion euros per power-plant have prevented CCS taking off.

In its eternal quest to avoid disparities, the EU later invited pioneers of cutting-edge renewable technologies to compete for the funding, dubbed the "NER 300" and worth around 4 billion euros ($5.6 billion).

The money will be taken from the EU's carbon market, known as the EU Emissions Trading Scheme, and handled by the European Investment Bank -- a choice that irked some EU finance ministers.

But the architects of the proposal have dropped a demand that every euro of funding should be matched by a euro from national coffers -- a prospect that worried some poorer member countries.

(Reporting by Pete Harrison)