Tests of a new technology for capturing greenhouse gases from coal-fired power plants have achieved 95 percent cuts in a step towards new ways to fight climate change, a Norwegian company said on Friday.

It's a breakthrough for us, Henrik Fleischer, chief executive of Sargas technology group, said of tests held since October of a prototype at the Vartan power plant, run by Finnish energy group Fortum (FUM1V.HE: Quote, Profile, Research) in Stockholm.

A competitive coal-fired power plant with carbon dioxide capture could be built today with this technology, he told Reuters. It could produce energy at competitive costs.

Many firms are seeking to strip heat-trapping carbon dioxide from burning coal to help nations including the United States and China, the top greenhouse gas emitters, to cut back.

Industries say they would need subsidies for any clean coal technology.

Tests by Sargas' five-meter (16 ft) high system of pressurized filters, absorbers and condensers at Vartan -- processing 60 kg (130 lb) of exhaust gases an hour -- are capturing 95 percent of carbon dioxide, Fleischer said.

This is a complex type of installation and it's good to know it works, he said. The system relies on existing technology adapted from the chemicals industry and would have to be 40 meters tall to work at full scale.

Fleischer said that the capture process costs just under $20 a tonne of carbon dioxide and that companies would need government help for storage -- perhaps by pumping the gas into offshore oilfields to raise pressure and extract more oil.

RISING SEAS

In the European Union market, prices of carbon dioxide emissions permits are about 22.7 euros ($33.30) for delivery in December 2008. Greenhouse gases are almost universally blamed by scientists for stoking warming that could bring more heatwaves, floods and rising seas.

A limitation of Sargas' technology is that the system works under pressure and only a handful of coal-fired power plants so far use the so-called Pressurized Fluidized Bed Combustion technology -- in Sweden, Japan and Germany.

That means it can be used in new plants, including any burning natural gas, but cannot be easily retro-fitted at plants where exhaust gases come out at atmospheric pressure.

It's not a big technology for existing plants but for future plants it could be interesting ... Theoretically you don't need so much energy, said Eva-Katrin Lindman, head of research and development at Fortum Varme.

Among other projects, WE Energy and Alstom (ALSO.PA: Quote, Profile, Research) Power Inc plan to start a test carbon capture facility at the Pleasant Prairie coal-fired plant in Wisconsin by the end of the year, using a system using chilled ammonia.

Sargas is working with aluminum producers Alcan (AL.TO: Quote, Profile, Research) and Norsk Hydro (NHY.OL: Quote, Profile, Research), French metals producer Eramet (ERMT.PA: Quote, Profile, Research) and Norwegian group Tinfos on plans to build a coal-fired power plant to supply metals smelters in Norway.

If they win approval as hoped next year, the 400 megawatt (MW) plant could be up and running with full carbon capture at Husnes on Norway's west coast in 2012, Fleischer said. Sargas is in also in talks with other countries.

Coal is the world's number two source of energy behind oil, accounting for about a quarter of all primary demand.

China Climate Energy