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Britain’s gamble on carbon capture and storage technology is facing the threat of Treasury cuts following warnings from MPs that the “high risk” policy should be reassessed to make sure it is “affordable for taxpayers and consumers”.
The Treasury will heavily scrutinise carbon capture projects in this year’s spending review, according to people briefed on the process, with ministers admitting they will not meet ambitious targets for the new technology.
The government announced £21.7bn of funding over 25 years for carbon capture in October but the money only went to two regions — in Teesside and Merseyside — leaving projects in the Humber and Scotland in a queue.
Those other schemes are now likely to get short shrift in June’s spending review, according to senior government figures, who said the Treasury was souring on putting more money into the technology.
It comes as MPs on the House of Commons public accounts committee said the government’s backing for “unproven, first-of-a-kind technology to reach net zero is high risk” and warned that taxpayers would not stand to benefit if the carbon capture projects were successful.
Carbon capture and storage involves trapping carbon dioxide as it is produced, compressing it and pumping it underground, sometimes into depleted oil and gas reservoirs, to avoid it being released into the atmosphere. There are questions over whether CCS technology is commercially and practically viable at scale.
The PAC said rollout of CCS would “have a very significant effect on consumers and industry’s electricity bills” and urged ministers to assess whether it would be affordable, given wider pressures on the cost of living.
The government has said that the £21.7bn for the projects will be funded by a mix of levies on energy bills and Treasury funding. It is aiming to attract another £8bn of private investment.
But Sarah Jones, energy minister, told the Commons energy committee in December that the previous Conservative government’s CCS target of 20mn-30mn tonnes of CO₂ annually by 2030 was “no longer achievable”. In her letter to the committee, Jones blamed inadequate funding by the Tories.
The carbon capture projects are coming under scrutiny from Rachel Reeves, chancellor, and Darren Jones, Treasury chief secretary, as part of their review of all government spending, concluding in June.
One person briefed on the Treasury’s thinking said: “People will have to realise they won’t be able to do all the things in the first term that they committed to. There won’t be enough in the fiscal wrapper. They will be looking at things like carbon capture and storage.”
Another Treasury insider said that given the tight economic backdrop, the case for further big investment in CCS was not yet clear. “We have to see if it works, or not.”
Two people familiar with the rollout of the projects said the sector was looking for leadership from government and a sense of whether further CCS schemes were likely to be prioritised.
Sir Geoffrey Clifton-Brown, PAC chair, said: “The government is gambling on carbon capture technology becoming foundational to achieving net zero.” He added: “All early progress will be underwritten by taxpayers, who currently do not stand to benefit if the projects are successful.”
Ed Miliband, climate change secretary, has championed carbon capture but government insiders say he sees the development of the Sizewell C nuclear power station as his top priority.
Carbon capture has been promoted by ministers as critical to their regional growth strategy.
The government said in October that the first projects in Merseyside and Teesside would “inject growth into the industrial heartlands of the North-west and North-east of England”.
In December, Reeves told the Financial Times that green energy investments, including in carbon capture, represented one of her “big bets” on the economy beyond the South-east.
Carbon capture proposals are also heavily intertwined with the future of existing heavy industry in areas such as the Humber, according to three people familiar with discussions between the energy sector and government. “If you don’t do it on the Humber,” added one of carbon capture, “you don’t hit the 2030 net zero target.”
The Department for Energy Security said: “Carbon capture, usage and storage is vital to boost our energy independence, and the Climate Change Committee describes it as a ‘necessity not an option’ for reaching our climate goals.
“There is no route to protecting jobs in our industrial heartlands and securing the future of heavy industry in the UK without it.” The department said decisions about future CCS deployment would be taken “in due course”.
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