The government will this month sound the death knell for the world's largest tidal energy project – to be built across the Severn estuary between Somerset and south Wales – when it rules out public funding for the controversial £20bn plan.

The announcement will please some environmentalists, who were worried about the impact on bird life in the estuary, but others say such spending cuts will make a mockery of David Cameron's pledge to be the "greenest government ever".

The private sector is unlikely to back the 10-mile tidal barrage, which would be able to provide 5% of the UK's electricity, without government money.

In a report to be published this month, ministers will recommend that further feasibility studies be carried out for one of four much smaller projects, which would cost about £3bn. But they will give no guarantee that the selected option will go ahead. "It will make pretty depressing reading," said one source who has seen the report.

It is understood that a consortium is trying to raise finance for the project, which would also create direct road and rail links across the estuary and a 1.5km lake. But a spokesman for the Severn Tidal Power Group (STPG), a consortium made up of Sir Robert McAlpine, Balfour Beatty and Taylor Woodrow, admitted it was unlikely that developers would foot the estimated £250m cost of getting a project to the planning stage because of the risk it would be refused.

MPs will table a cross-party motion this week calling on the government to pay a £60m grant promised before the election that is vital for the UK's hopes of becoming a major wind turbine manufacturing centre. The money would go to a selected port to allow it to upgrade its infrastructure – raising bridges, for example, to allow giant turbines to be transported and shipped for installation off the UK coast. Siemens and General Electric are planning to build several turbine factories in the UK, and these plans are conditional on the port upgrade going ahead, as are possible plans by Mitsubishi to build its own facility. Trade body RenewableUK estimates that the port upgrade would create a total of 50,000 jobs.

Doug Parr of Greenpeace said: "Without the right leadership and investment, this will not be the greenest government ever. And there's no way we'll see a sustainable low-carbon economy without the necessary support for our renewable industry. Other clean energy projects must not face the same axe as the Severn barrage."