Rolls-Royce Holdings is jettisoning part of its carbon capture operation as the FTSE-100 engineering group streamlines under its new boss.

Sky News has learnt that the company decided to abandon work on creating a direct air capture (DAC) product last month, and has redeployed the handful of people working on the project to other roles.

Insiders said, however, that Rolls-Royce would continue to work on a government-funded research project focused on DAC.

One added that the team leading the creation of a DAC product was now exploring obtaining financing from external investors in a bid to keep it going.

DAC involves extracting carbon from the air through a chemical process, in order to combine it with hydrogen to create a synthetic fuel.

“If the energy for the whole process – including the hydrogen production – comes from a zero-carbon source such as renewables or nuclear, you end up with a real ‘net zero’ fuel for industries such as aviation because you are taking CO2 from the air to put into a fuel then putting it back in the air when you burn the fuel,” said one industry expert.

The abandonment of the commercial product work comes as Tufan Erginbilgic, who recently took over as Rolls-Royce’s chief executive, tried to boost the group’s performance.

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He has been publicly critical of the way parts of its business, most notably its power-systems division, had been run before he joined, and had described the entire company as “a burning platform”.

He has shaken up swathes of its management, including replacing its chief financial officer.

A Rolls-Royce spokesperson said: “We will fulfil our UK government-funded programme to build and test a direct air capture (DAC) prototype in Derby, and expect to complete that work in 2024.

“Separate exploratory work to develop a DAC product has stopped.

“We are currently exploring how we can capitalise on the valuable work we have done to date on that part of the project.”

Rolls-Royce announced last July that it had secured £3m in government funding under the Net Zero Innovation Portfolio programme.

Its DAC work formed part of the company’s net zero roadmap, announced in 2021 under Mr Erginbilgic’s predecessor, Warren East.

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