The firm has teamed up with the Energy Technologies Institute to construct a pilot plant designed to capture as much as 95% of its carbon dioxide emissions.

Six global engineering giants – BP, Caterpillar, EDF, E.ON, Rolls-Royce and Shell – are behind ETI that with the Government aims to develop mass scale solutions to meet the UK’s 2020 and 2050 energy targets.

ETI will invest £24m in the important test scheme that should be designed, built, operated and tested by the middle of 2015.

Some £3.5m will be spent on the front end engineering design for the demonstration unit over the next 16 months.

Costain will work with the University of Edinburgh and Imperial College on the first stage, to optimise performance of the technology.

ETI will invest the remaining £20m in building the pilot plant.

A potential site has been identified but the final decision on location will be made closer to the sanctioning of building.

Speaking at the Carbon Capture and Storage Development Forum in London yesterday, energy minister Charles Hendry said: “I am very pleased to welcome the ETI’s latest project in CCS, which is a further example of Britain’s global leadership in this important technology.

“Pilot projects like these will help develop and reduce the costs of the next generation of capture technologies and are an essential step on the road to deployment.”

Martin Land, Power Sector Director from Costain, added: “We are excited at the potential of this innovation, and its contribution to the increased attractiveness of clean fossil generation, both in UK and wider global markets.

“The ETI support is essential to accelerate the development by our technology team in Manchester”

ETI has also commissioned a project to develop and demonstrate next generation carbon capture technologies specifically for gas fired power stations.

An announcement on who will carry out the work on this project is expected by early 2012.