Spring budget 2023: where does it leave carbon capture and storage (CCS)?

The Chancellor Jeremy Hunt announced in his spring budget that he was allocating ‘up to £20bn’ to support the deployment of carbon capture and storage (CCS), with up to £1bn invested per year. He has also reclassed nuclear power as an ‘environmentally sustainable’ energy source, a move designed to boost investment in the sector.

However, with none of this money reflected in the formal budget policy costings, none to be spent before the next election, and the government yet to decide whether it will be funded by tax or levies, what does this mean for the UK’s climate pledges?

What is carbon capture and storage (CCS)?

Carbon capture and storage (CCS) is the process of trapping carbon dioxide produced by burning fossil fuels or other chemical or biological processes and storing it in such a way that it’s unable to affect the atmosphere – with the aim of mitigating the effects of global warming.

CCS should not to be confused with carbon capture utilisation and storage (CCUS), where the captured carbon dioxide is used in other applications.

How do CCS and CCUS fit into the UK government’s green commitments?

As part of his ‘ten-point plan for a green industrial revolution’, former Prime Minister Boris Johnson set out his ambition to deploy CCUS at scale – in two of the UK’s industrial clusters by the mid-2020s, with a further two by 2030.

Phase one of the cluster sequencing programme – overseen by the Department for Energy Security and Net Zero – will identify and sequence CCUS clusters which are suited to deployment in the mid-2020s. HyNet and the East Coast Cluster have been confirmed as Track 1 clusters.

Phase two will identify individual projects across capture applications (industry, power, hydrogen, waste) that could feasibly connect to the Track 1 cluster locations. It’s through this phase that the government will select the projects to enter negotiations for CCUS programme support.

In the 2023 spring budget, Hunt announced that phase two will proceed and that phase one will be expanded so more CCUS projects will be able to enter the selection process.

At present, the cluster sequencing project focuses solely on industrial clusters, whereas the issues with carbon emissions aren’t only limited to industrial applications. Other companies looking to divest their carbon emissions appear to have a long wait ahead of them before they will have the ability to be connected to any CCS plant, behind larger industrial emitters already located in the areas where the two CCUS projects are planned (North West and Teeside and Humber).

How have the Chancellor’s plans for CCS been received?

While the appearance of the Net Zero agenda in the spring budget has been welcomed, many have concerns that it doesn’t go far enough and there’s scepticism about how it fits into the government’s pledge to reduce greenhouse gas emissions by at least 100% of 1990 levels (net zero) by 2050.

Luke Murphy, Associate Director for Energy and Climate at the Institute of Public Policy and Research, has warned that ‘the UK now risks falling seriously behind’ the US and Europe in the worldwide race to achieve net zero. The Head of Policy and Campaigns at the Chartered Institute of Environmental Health, Ross Matthewman said that Hunt had ‘missed a golden opportunity to both reduce energy bills and decarbonise the housing sector’, while Josh Burke, a senior policy fellow at LSE’s Grantham Research Institute, pointed out there were two Es missing from Hunt’s refrain ‘enterprise, education, employment and everywhere’: namely environment and energy.

Many are asking why the government is delaying this major investment until after the next general election in 2025. There are also questions being raised as to whether CCS will work in practice and, if adopted, whether it will encourage the divesting of fossil fuels in energy generation and industrial applications.