A plan to enhance crop growth in greenhouses outside Rotterdam, by pumping in waste CO2 from a nearby bioethanol plant, has been backed with a €5m (£4.2m) EU grant.

Farmers in the Zuidplaspolder area currently generate their own CO2 to feed into the greenhouses using cogeneration systems or gas-fired boilers, that also help heat the facilities.

But supporters of the carbon capture project predict that installing a pipeline, linking the Abengoa Bioenergy Netherlands plant in the harbour area of Rotterdam to a 550 hectare swathe of agricultural land in the Zuidplaspolder, should prevent around 25 million cubic metres of natural gas being burnt every year – saving 45,000 tons of CO2.

The European Commission had to review its tight competition regulations to determine whether it was able to support the project, proposed by Bio Supply CV, part of the Organic CO2 for the Assimilation of Plants (OCAP) group.

But the commission concluded this week that the aid would not distort markets and, in addition, the emissions savings would not be achieved without the EU funding – given that private investors were unlikely to back a project based on such cutting-edge technology.

Commission vice president in charge of competition policy, Joaquín Almunia, said: “The Dutch aid favours the recycling of waste CO2 from local industry without unduly distorting competition. It reduces greenhouse gas emissions and increases the level of environmental protection in the EU.”

Under the terms of the funding, the money is conditional on Bio Supply CV granting third parties access to the pipelines, raising the prospect of a carbon capture and storage hub being developed near Rotterdam.