Carbon capture and storage (CCS) technology could result in cheap energy rates as well as providing a £4 billion annual economic boost.
In a new report expanding on the pledge of Ed Miliband, the energy and climate change secretary, new coal plants will have to use CCS technology for at least 300MW of output from day one and this will need to expand to the plant's full output within five years.
The five years will commence from the moment that CCS technology is deemed to be commercially viable, something that is yet to be achieved on a large scale.
Lord Chris Smith, chairman of the Environment Agency, said: "The Environment Agency recognises that there are still some significant issues to address including contingency plans should it take longer than anticipated to prove the technology."
If CCS technology is not available for wider commercial use by 2020, measures such as emissions caps and reduced operating hours could be imposed on new plants.
New coal power stations may be needed to plug the energy gap between upcoming decommissions and new nuclear reactors becoming operational.
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