A £1bn fund for investment in an innovative energy plant in Scotland has been quietly axed.
George Osborne made no mention of the carbon capture and storage (ccs) project in his spending review.
But in a statement to the stock exchange ministers said the funding had been withdrawn.
The industry had been awaiting an announcement that Peterhead had scooped the prize.
But the Government said that the competition, which had two bidders - the Peterhead scheme and the White Rose scheme in Yorkshire, cannot proceed on its current basis.
Experts denounced the move saying it would squander the UK's lead in an world beating technology.
The project was designed to develop technology which can capture carbon emissions from fossil fuel power stations.
In 2007 David Cameron said that he would “strain every sinew” to help the UK develop the cutting edge facilities.
Only this month the Energy Secretary Amber Rudd predicted that CCS could create jobs to the UK.
Carbon Capture and Storage Association chief executive Dr Luke Warren said the announcement was "devastating".
EEF, the manufacturers' organisation, warned that for many sectors such as steel and cement carbon capture was the only way to cut emissions.
Claire Jakobsson, the organisation's head of climate and environment policy, said: "While 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."
Labour’s shadow energy secretary Lisa Nandy said the announcement was a "huge betrayal" of the communities who could have from the technology.
The power company Drax announced in September it was pulling out of the White Rose scheme blaming the drop in the wholesale price of electricity and moves by the Government to cut support for green technology.
At Peterhead, Scotland, Shell and SSE wanted to capture up to 15 million tonnes of carbon dioxide emissions and store them offshore deep under the North Sea, potentially creating 600 jobs.
Both Shell and SSE said they were disappointed by the decision.
Doug Parr, head of policy at Greenpeace, said the Treasury had scrapped the "centrepiece" of the Prime Minister's bid to cut carbon just as he heads off for major climate change talks in Paris.
"This is yet another clear-cut example of the Government's incoherent energy policy being played out,” he said.
In 2014 the Lib Dem Energy Secretary Ed Davey suggestd that an independent Scotland would find it "more difficult to proceed" with a carbon capture project.
Jonathan Church, climate and energy lawyer at environmental lawyers ClientEarth, described the move as “extremely damaging”.
“Development of CCS has been delayed for years and by successive governments, and by axing the £1bn grant to fund these projects, the UK government is essentially closing off one of the key avenues in the UK’s transition to a low-carbon economy.”
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