The department for Business Enterprise and Regulatory Reform (BERR) has also published consultation documents on preparing a legislative framework for a generation of carbon capture-ready power stations.
Business secretary John Hutton will address parliament this afternoon, and is expected to focus on the urgent need to replace nine of Britain's existing nuclear power plants by the end of 2015.
Carbon Capture and Storage technology is expected to reduce CO2 emissions by up to 90% on existing levels.
Hutton said: "Alongside nuclear, renewables and gas, coal is and will continue to be a feature of the UK's electricity mix.
"The progress we are making with the CCS demonstration competition and on developing a sound legislative and regulatory framework will help to deliver our ambition to see CCS ready for commercial deployment by 2020."He continued: "We have received an excellent response from industry to this competition – indicating their commitment to the clean energy agenda. We cannot deliver wide-scale deployment of CCS, nor tackle global climate change, alone. We need greater international collaboration and will continue to urge other countries to demonstrate a similar level of commitment to demonstrating CCS as the UK.
"We must ensure CCS is recognised in the EU Emissions Trading Scheme and the Clean Development Mechanism, and have been pushing hard for it to be high on the agenda at the forthcoming G8 Leaders meeting," he said.
A shared EU emissions cap for the whole energy sector is expected to give flexibility to the industry, by integrating carbon capture-ready coal-fired power plants.
The next phase of the consultation will cover contractual issues and technical issues with the shortlisted companies.
The Carbon Capture and Storage demonstration project is expected to be fully operational by 2014, while the technology is expected to be ready for commercial deployment by 2020.