Plans for the UK's first carbon capture project at the Longannet power station in Fife have been scrapped, the energy secretary has confirmed.
Chris Huhne announced the failure to reach a "deal" with power companies to capture carbon dioxide emissions at the plant and pipe them under the sea.
Mr Huhne blamed problems with the length of pipeline needed.
But he said the government hoped other schemes could work, indicating interest at Peterhead in Aberdeenshire.
Mr Huhne told BBC Scotland interest had been expressed by Scottish and Southern Energy, which operates Peterhead, and he was confident a carbon capture and storage scheme could be brought online for the £1bn which the UK government had been offering to develop the CCS technology.
He said there were "specific" technical problems with Longannet which meant the scheme could not be made to "stack up" and would have required much more money.
"If there was a completely unlimited resource then we may have been able to surmount the technical problems at Longannet," Mr Huhne said.
"When we have clear indications that we can do what we need to do with carbon capture and storage at a commercial scale within the £1bn budget that we have got, then it seems to me that is what sensible taxpayers and energy bill payers would want us to do."
Responding to Mr Huhne's announcement, Scotland's First Minister Alex Salmond said it was "deeply disappointing".
Environmental group WWF Scotland said scrapping the scheme meant four years had been wasted in the battle to tackle climate change.
Scottish Power's coal-fired plant at Longannet had been the only remaining site in the UK government competition for the funding.
Longannet, which is the UK's second largest coal-fired power station and Europe's third largest, is among the biggest polluters in the country.
It produces energy for two million people and emits between seven million and eight million tonnes of carbon dioxide (CO2) a year.
The carbon capture scheme hoped to pump liquified CO2 emissions from Longannet into depleted oil and gas fields in the North Sea.
Under the plans, 260km of pipe would have carried the CO2, in the first project of its kind.
The energy secretary told MPs the length of pipeline needed to take the CO2 to the undersea reservoirs made the scheme "unviable".
He said studies into carbon capture would be published and that the government was "absolutely confident" future projects would go ahead.
Scottish Power, which is owned by Spanish firm Iberdrola, was involved in the CCS consortium along with its partners National Grid and Shell UK.
Scottish Power's generation director Hugh Finlay said: "The consortium is immensely proud of the work we have completed in the last four years.
"Our combined efforts have seen this potentially world-changing technology develop from being a concept in a laboratory to a definitive blueprint that could be implemented."
He added: "As a result of the study we now understand how the CCS process works from power station to storage site.
"This gives us great insight into the physical infrastructure that we need to support it, the regulatory framework it fits within and the organisational model of a CCS business."
Mr Salmond said: "At the end of the day, this technology requires the courage and the vision to make the investment happen, and that is what has been lacking in successive Westminster administrations.
"At a time when North Sea revenues are coming in at record levels, it was surely not too much to expect that the Treasury would make the necessary funding commitment for Longannet to go forward.
"The cost would have been less a 10th of this year's alone estimated North Sea revenues of £13.4bn."
Labour's shadow energy minister Tom Greatrex said: "Today's move highlights the dead hand of the Treasury in scuppering moves towards a greener energy mix.
"It risks losing our competitive advantage in developing carbon capture - engineering expertise and valuable skills that we could export around the globe.
"It is vital that this money is not recycled into the Treasury but used for carbon capture and storage projects.
"Without those guarantees the government's commitment to energy, the environment and green jobs will be increasingly viewed as all talk, no action."
Dr Dixon of WWF Scotland said the news was "massively disappointing".
He said: "If technical and economic hurdles can be overcome CCS has the potential to help reduce emissions at thousands of coal power stations around the world.
"However, almost four years after launching its funding competition, plans for CCS in the UK have descended into farce."
Juliet Swann, head of campaigns at Friends of the Earth Scotland, said: "The UK government failing to support the application to its necessary extent from the outset is not just an indication of their hypocrisy over climate change, but also shows how little interest they have in investing in Scotland."