The US Department of Energy (DOE) has announced plans to invest up to $1.3bn (£654m) in carbon capture and storage technology (CCS) over the coming years, as it seeks to develop a solution that will allow it to curb carbon emissions while continuing to exploit the country's huge coal reserves.

The department said it was inviting applications from private firms interested in sharing some of the cost of commercial-scale demonstration projects that would combine clean coal Integrated Gasification Combined Cycle (IGCC) plants with CCS systems.

The DOE expects $290m (£146m) will be invested in the projects through 2009 and an additional $1.01bn (£509m) should be available in subsequent years depending on Congress’ budget.

"This announcement brings us one step closer to the installation of carbon sequestration technology on commercial-scale clean coal power plants," said Bud Albright, under-secretary of energy at the DOE.

The projects will increase energy security and reduce CO2 emissions by ensuring coal, an abundant resource in the US, can be used in an environmentally responsible way, he added.

To qualify for funding, projects must aim to capture 90 per cent of carbon emissions from the plant, while also removing at least 90 per cent of mercury emissions and reducing sulfur, nitrogen oxides and particulate emissions to " very low levels".