The decision by E.ON marks an end to one of the most bitterly fought environmental campaigns in British history. The admission, which emerged after an unplanned and off-the-cuff remark from one of the company’s German officials, will be greeted with delight by environmentalists but is a blow to Ed Miliband’s plans for Britain to lead the way in the development of so-called clean coal technology.

E.ON first tabled plans to build two new coal-fired power units at Kingsnorth in October 2006 to replace an older plant which is being forced out of service by new EU pollution rules. The plant was due to start generating 1,600 megawatts of electricity — enough to power a city the size of Manchester — in 2012. It would have been the first coal-fired station to be built in Britain since the completion of the Drax plant in Yorkshire in the mid-1980s. But the plans provoked a furious backlash from environmental groups and a succession of energy ministers have hesitated to give the plant a final green-light.

While groups like Greenpeace, who have staged a series of spectacular stunts at Kingsnorth, claimed a victory, E.ON said the decision was taken on economic grounds. The truth probably lies somewhere in between.

It is true that the recession has prompted a steep decline in electricity demand that has undermined the rationale for the plant. A collapse in global gas prices has also left coal-fired power plants far less competitive than they were two years ago.

E.ON is also suffering an investment squeeze because of the recession and is concerned about the uncertainties of future carbon regulation, which make it hard to work out the long-term costs of operating Kingsnorth.

Nevertheless, E.ON’s decision was made easier by the strength of public feeling over new coal plants. Even though it had since 2008 pledged to equip them with carbon capture technology, the cost of actually doing so remained far from clear — it would consume about 25 per cent of the energy produced by the plant, significantly changing its economics.

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