The UK's first carbon capture and storage project should be operational by mid-2020s, according to ministers.
A commitment to the development of technology, which prevents greenhouse gases into the atmosphere, before a summit in Edinburgh.
Research funding was also announced for a carbon capture scheme in Aberdeenshire.
It will see carbon dioxide after piping to storage sites beneath the North Sea.
Experts say that the technology is an important tool in tackling climate change.
The UK government was criticized in 2015 after a £ 1bn pound competition to develop carbon capture and storage was dropped.
Power stations in Holyhead in Aberdeenshire and Drax in North Yorkshire were the final competitors for the grant.
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Energy and Growth Minister, Claire Perry said: "Today in this seminal summit, the UK sets a world-leading ambition for the development and use of carbon capture and storage technology to reduce emissions.
"It shows how determined each country is to unlock the potential of the technology that changes this game that representatives from all over the world are collecting here in Edinburgh today."
The Acorn Project will capture about 200,000 tonnes of CO2 from the St Fergus Gas terminal near Peterhead and transport it to one of three gas fields filled with existing pipelines.
He receives £ 175,000 from the UK government, with match funding from the Scottish government and additional European funding.
In additional periods, the project could produce hydrogen from North Sea gas and the storage of carbon dioxide, which the process creates as a by-product. The hydrogen could then be used to heat people's homes.
The current pipelines on the land could also be used to transport CO2 to storage from heavy industrial areas around Grangemouth.
Project leader Alan James said: "Scotland can use the assets of the oil and gas legacy to provide environmental benefits, transport unlocking and CO2 storage solutions for the use and retention of other carbon projects along the UK and future eastern coast of Europe.
"With the right support, ACS Acorn could be operational in the early 2020s, making a significant contribution to the UK and European emission reduction targets and helping to establish a viable commercial future for CCUS investment."
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The UK government said that it would provide more detail next year about how it intends to develop the first United Kingdom Carbon Capture, Use and Storage Facility (CCUS) facility.
He said he would invest £ 20m in technology in industrial sites across the UK, including Teeside and Drax.
Dr Fatih Birol, of the International Energy Agency (IEA) said: "Without CCUS as part of the answer, achieving our international climate goals is practically impossible.
"CCUS can also improve energy security and boost economic prosperity. To date, so far, progress has been turned and if this continues, the challenges we face in the energy sector will come smoothly.
Next week, world leaders will gather in Katowice, Poland, for the 24th UN Climate Conference where they will discuss the implementation of the Paris Agreement goals.
The agreement commits countries to restrict global temperature increases to "better below" 2C and many consider that CCS is an important way to achieve that goal.
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Scottish Energy Minister Paul Wheelhouse said: "We believe that Scotland is in a unique position to undertake this technology at an industrial scale.
"In addition, the opportunity to re-use existing key assets in Scotland provides the most cost-effective way to use CCUS."
Dr Richard Dixon, director of Friends of the Earth of Scotland, said that as two Scottish and Scottish coal stations now closed "the main reason for CCS in Scotland has disappeared".
He added: "Instead of pursuing something we do not need, the UK government should spend its money on renewable energy, energy efficiency and energy storage, all of which give a direct reduction in carbon emissions.
"CCS could have a role in relation to industry in the long term, but with fossil vehicles being gradually corrected and cut down on the plastic mountains we use, even these carbon sources will fall into substantial in the next decades. "