Power producer Vattenfall AB has to be feeling pretty proud this week. The Swedish utility has turned out the world's first pilot plant to employ carbon capture and storage (CCS) technology.

Vattenfall has opted for "oxyfuel" combustion technology, one of three competing carbon capture options. In this process, coal is burned in nearly pure oxygen, instead of air. This eliminates noxious NOx (nitrogen oxide) emissions, and helps produce a highly concentrated CO2 stream for storage. The downside is that the oxygen production process (courtesy of German gas guru Linde) is energy intensive.

If more power generators opt for oxyfuel, this would be very good news for Linde and other industrial gas guys like Air Products & Chemicals (NYSE:APD) and Praxair (NYSE:PX). These companies have already cut their teeth on the technology in the glass industry. Now they just need to figure out how to slash the cost further.

Fortunately, there are tons of companies (and governments) throwing money at carbon capture research.

American Electric Power (NYSE:AEP) is tackling both an oxygen-fired approach with McDermott (NYSE:MDR) subsidiary B&W, and the more mature post-combustion scrubbing technique in partnership with Alstom. And Duke Energy (NYSE:DUK) is looking at incorporating CCS at its clean coal gasification plant in Indiana.

Of course, there have been some bumps in the road. The ubiquitous BP (NYSE:BP) backed out of a Scottish scheme in 2007, and the U.S. Department of Energy went balk to the FutureGen. But for every scrapped plan, it seems several more have sprung up in its place. From Australia to China, carbon capture is capturing a lot of industry attention.

So which technology will win out? Oxyfuel can be retrofitted to existing plants, but it's energy intensive. Pre-combustion CCS may generate cheaper oxygen at new gasification plants, but this doesn't help with all of our existing generating capacity. Post-combustion scrubbing is the most expensive of all. What we need is the sort of breakthrough provided by Energy Recovery (NASDAQ:ERII) in the field of seawater desalination. I don't know when or where it will happen, but this is a technology area well worth monitoring.

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Fool contributor Toby Shute doesn't have a position in any company mentioned. The Motley Fool has a disclosure policy.