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UK cancels carbon capture funding

26 November 2015

The UK government has cancelled its £1bn competition for carbon capture and storage (CCS) technology, just five months before it was due to be awarded. The abandonment of a technology seen as vital in tackling global warming comes just days before the major UN climate change summit in Paris.

Peterhead power station - Image: SSE
Peterhead power station - Image: SSE

The government informed the London Stock Exchange of its decision on November 25, stating: “Following the chancellor’s autumn statement, HM government confirms that the £1bn ring-fenced capital budget for the CCS competition is no longer available. We will engage closely with the bidders on the implications of this decision for them.”

CCS traps the carbon dioxide from coal and gas power plants and buries it underground so it cannot warm the climate. The UN’s Intergovernmental Panel on Climate Change concluded CCS is hugely important to tackling climate change in the most cost-effective way. Without CCS, the costs of halting global warming would double, the IPCC said.

The UK government’s own advisors, the Committee on Climate Change, said in October: “CCS is very important for reducing emissions across the economy and could almost halve the cost of meeting the 2050 target in the [UK’s] Climate Change Act.”

Two projects had been in the running to build plants demonstrating CCS on a commercial scale. One was backed by Shell and SSE at Peterhead. The White Rose consortium was based at Drax, the UK’s largest power plant, but this was called into question after the Drax operating company halted its investment in the technology last September after the government cancelled financial support.

BusinessGreen said that Chinese investors had been lined up to replace Drax in White Rose, but this must now be in doubt. Also, the EU had made €300m of CCS funding available through its NER programme, which experts said was highly likely to be secured by one or both of the planned UK CCS projects.

Shell said the Peterhead project was now dead and its CCS work would be focused in other countries. “Shell remains committed to CCS – as our involvement in demonstration projects in other parts of the world shows – and we view it as an important part of a low-carbon energy future,” said a spokesman.

Claire Jakobsson of EEF, the manufacturers’ organisation, said CCS could save the UK £32bn a year by 2050 and abandoning the competition was a false economy: “In choosing to save a relatively small sum of taxpayer money in 2015, the government is unnecessarily committing vast amount of future energy consumers’ money.”

The UK’s energy policy was reset on 18 November and aims to build many new gas-fired power stations. To meet carbon targets, any new stations would have to stop generating by 2030 unless CCS is fitted, but the cancellation of the CCS competition makes this less likely.

“If we are serious about building a clean and secure energy sector we need a diverse energy system, and CCS is central to this,” said Jenifer Baxter, at the Institution of Mechanical Engineers. “Without CCS this will mean we are locking ourselves into relying on unabated fossil fuel power for generations to come.”

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