UK scraps £1 billion CCS funding in budget cull

Published 18:27 on November 25, 2015  /  Last updated at 20:02 on November 25, 2015  /  EMEA, EU ETS  /  No Comments

The UK, as part of government-wide spending cuts announced Wednesday, scrapped plans to award up to £1 billion ($1.5 billion) to kickstart CCS, putting two advanced projects in doubt and dealing a severe blow to the nascent technology's future in Europe.

The UK, as part of government-wide spending cuts announced Wednesday, scrapped plans to award up to £1 billion ($1.5 billion) to kickstart CCS, putting two advanced projects in doubt and dealing a severe blow to the nascent technology’s future in Europe.

The two large-scale CCS projects that were vying for the funding included Shell’s Peterhead gas-fired scheme and White Rose, which was to capture CO2 from Drax’s coal-fired plant.

Shell said it saw no future for Peterhead in the near-term and would focus on CCS in other countries, including its Quest oilsands project it launched earlier this month in Alberta.

Drax withdrew from the project in September, but its partners Alstom and the BOC industrial gas group vowed to carry on.

“It is too early to make any definitive decisions about the future of the White Rose CCS Project. However, it is difficult to imagine its continuation in the absence of crucial government support,” said Leigh Hackett, CEO of engineering group Capture Power of White Rose, in a statement.

White Rose was awarded €300 million from the EU’s NER300 programme funded by selling EUAs, but it was counting on the UK’s competition cash.

This means the money will return to EU coffers, adding to the programme’s dismal record for funding carbon-cutting schemes and leaving the EU with no advanced large-scale CCS schemes on the horizon.

Britain had previously viewed CCS as essential to meet its legally-binding target to cut emissions 80% under 1990 levels by 2050.

“This is very disappointing news. There have been concerns about the initial costs of this technology, but we will only be able to properly assess the viability of UK CCS upon the successful delivery of a demonstration project,” said Jenifer Baxter, head of energy and environment at the Institution of Mechanical Engineers.

UK manufacturers group EEF agreed and said the move was not in the long-term interests of the UK economy or energy consumers.

“CCS has the potential to halve the costs of decarbonising the UK economy by 2050, which amounts to £32 billion a year by 2050. In choosing to save a relatively small sum of tax payer money in 2015, government is unnecessarily committing vast amount of future energy consumers’ money. For many sectors, such as steel and cement, there are simply no other options available for cutting emissions. No CCS locks many industrial sectors into a carbon intensive future paying increasing amounts in carbon taxes,” said Claire Jakobsson, Head of Climate & Environment Policy at EEF.

FACTORIES EXEMPT, CONSUMERS PAY

Additionally, finance minister George Osborne said the government will permanently exclude energy-intensive industries from environmental levies.

Alone, this would add £5 a year to consumer energy bills, but plans to reduce energy efficiency charges on suppliers and cuts to green energy subsidies are set to lower consumer energy bills by £30 a year in 2017-18, the government said.

Observers said they were unclear about the impact of the move without further details.

By Ben Garside – ben@carbon-pulse.com

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