£20bn over 20 years: UK Government confirms unprecedented carbon capture investment
The Treasury has confirmed that, at the Budget, Chancellor Jeremy Hunt will announce a £20bn investment plan to scale up the UK’s carbon capture sector, to be spent over a 20-year period.
The Budget speech is not due until Wednesday (15 March) but, on Friday evening (10 March), the Treasury has confirmed some of the key inclusions on finance for the energy sector – including a globally unprecedented commitment of public funding to man-made carbon capture technologies.
Hunt will lay out plans for a two-decade investment plan in the carbon capture space and pledge to ensure that “shovels are in the ground” on the first tranche of projects by the end of 2024. The Government is notably aiming for at least one low-carbon industrial cluster with carbon capture to come online this decade and is also assessing opportunities for smaller, dispersed carbon capture sites.
The Government is claiming that, with the investment set to be outlined by Hunt, the UK can expect to capture between 20 million and 30 million tonnes of CO2 per year by 2030.
The Climate Change Committee (CCC) has recommended that the UK aims to host at least 22 million tonnes of annual carbon capture and storage (CCS) capacity online this decade, in order to support its legally binding 2050 net-zero target. But previous reports from other bodies have warned that, at present, the UK is primed to bring less than half of this capacity to fruition. The CCC has also warned that this level of growth is not guaranteed without smart policy interventions.
Energy Security and Net-Zero Secretary Grant Shapps said the UK can learn from its global leadership on offshore wind to replicate this success in carbon capture industries, particularly as “no one country has yet captured the carbon capture market”.
The Government has often been accused of squandering opportunities to lead the world on carbon capture. In Autumn 2015, it decided to axe a £1bn fund to commercialise carbon capture technologies. Labour accused the Conservatives of “squandering investor confidence” in the emerging sector and of wasting millions of pounds of public money. Government funding provided or pledged in any single initiative since then has never reached the billion-pound mark.
Carbon capture, usage and storage (CCUS) has been described by the CCC as a “non-optional” component of the UK’s net-zero transition.
However, significant concerns remain around whether it will truly be used to address emissions from hard-to-abate sectors. MPs and researchers have questioned whether sectors that are easier to abate could simply purchase up credits, leaving none for heavy emitting sectors like steel. There are also concerns that the use of CCUS could be used as an excuse to de-prioritise emissions reductions, which could be risky in terms of climate impact, as CCS technologies are in their relative infancy at a commercial scale.
Spotlight on nuclear
In addition to the £20bn for CCUS, the Treasury has confirmed that Hunt will address the need to scale the UK’s nuclear energy generation capacity at the Budget. Specifically, he will announce a new competition for Small Nuclear Reactor (SMR) designs and pledge to match an as-yet-unspecified proportion of private investment in SMRs with public funding.
Under the Energy Security Strategy, the Government is aiming for the UK to host up to 24GW of nuclear capacity by 2050. By this point, nuclear should meet 25% of national electricity demands, up from 16% in 2021. The Government foresees both large-scale projects and SMRs playing a role in delivering these targets.
SMRs could make nuclear more affordable by reducing lead times and project costs. There is also the argument that smaller sites are likely to be less disruptive to local communities and nature than mega-projects. Sizewell C, for example, is facing a legal challenge over its likely water footprint and its proximity to habitats for seabirds and other wildlife.
Last spring, the Office for Nuclear Regulation began the approval process for Rolls-Royce’s 470MW SMR design at the request of the Government. The process typically takes four or five years for large reactors but may be shorter for SMRs. Hunt will say that he wants multiple designs to be ready for deployment as soon as possible.
Hunt will also confirm that the Government will advocate for nuclear to be classed as ‘green’ in the UK’s forthcoming green finance taxonomy, in a move he believes will leverage greater private investment. The taxonomy was due in December 2022 but has been delayed and is now expected by mid-2023. The EU faced much backlash for its decision to label nuclear ‘green’, given strong opposition from some member states such as Germany.
The Treasury has not yet made any statement on inclusions in the Budget on renewable energy or energy efficiency. It has, however, stated that the Budget will cover up to 50,000 skilled jobs in the energy industry.
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