A decision on a location in Germany for the 450-megawatt plant was likely in the second half of 2007, the company said.

"Ultimately, we will be the first company in our sector to realise this kind of project on an industrial scale," said RWE chief executive Harry Roels in the statement.

RWE said its project would break new ground by using onshore storage of CO2. Most clean-coal projects up to now have focused on pumping CO2 into offshore sites like depleted oil and gas fields.

Advances in clean-coal technology are gathering pace as power firms, industry's biggest polluters, face pressure to curb emissions of CO2 -- the main greenhouse gas blamed for global warming and climate change.

Coal-fired plants face the toughest CO2 limits under a Europe-wide emissions trading scheme launched last year.

At the same time soaring gas prices have re-ignited interest in coal's potential as a fuel.

Worries about security of gas supply after Europe's biggest provider Russia briefly curbed flows at the start of the year have also boosted the case for coal.

RIVAL PLANS

RWE's German rival E.ON plans to build Britain's first new coal-fired plant for 30 years. The plant will be based on clean-coal technology.

RWE said German lignite was the preferred coal source for the plant though options to use hard coal would also be examined.

Germany is among the leading developers of so-called carbon sequestration and storage technologies to contain CO2.

RWE's announcement came ahead of a planned energy summit between the German government and industry on April 3 when reconciling investments in new power stations with environmental targets will top the agenda.

At the summit, major German power utilities plan to announce 13 billion euros worth of investments in generation plants to replace ageing equipment.

In return, they want Chancellor Angela Merkel's government to provide generous CO2 quotas to cover the production of the new power plants -- which are mostly coal-fired -- in a new national allocation plan for Europe's emissions trading scheme.