Sharecast - According to Sky News, 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.
However, insiders told Sky that Rolls-Royce (LON:RR) 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," one industry expert told Sky.
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."