Five Things to Know about Osborne’s £1bn Carbon Capture and Storage Fund Cut


The UK government has been fiercely criticised after Chancellor George Osborne quietly scrapped a £1bn project to cut carbon emissions and removed more “green crap” from household energy bills reports the Independent (alongside almost every other British media outlet).

The announcement to cancel the competition for carbon capture and storage (CCS) technology – just six months before it was due to be awarded – means there are now no CCS projects in the UK.

Abandoning the technology championed by Prime Minister David Cameron, and seen as vital in tackling global warming, will be an embarrassment to the UK. And all this just days before the UN climate change conference in Paris.

Osborne’s Autumn Statement also confirmed that the Department for Energy and Climate Change (DECC) will see a 22 percent cut in day-to-day spending, while the Department for the Environment, Food and Rural Affairs (Defra) will see a 15 percent cut.

Here are five things you need to know about Osborne’s CCS cut:

1. It Was Unexpected

Abandoning CCS technology was not hinted at in the Conservative’s 2015 general election manifesto last spring, which read: “We have been the greenest government ever … committing £1bn for carbon capture and storage.” 

And it wasn’t in DECC Secretary of State Amber Rudd’s energy reset speech last week.

In fact, the move wasn’t even mentioned in the Autumn Statement announcements. It was confined to a stock market news website.

At 3pm yesterday the government informed the London Stock Exchange of the decision, stating: “Following the chancellor’s autumn statement, HM government confirms that the £1bn ring-fenced capital budget for the Carbon Capture and Storage (CCS) competition is no longer available. We will engage closely with the bidders on the implications of this decision for them.”

The decision was not mentioned in Treasury documents.

2. CCS was Already Feeling the Pressure

Previous government cuts to green initiatives – including subsidies for solar, wind and biomass – have already been putting pressure on CCS projects in the UK.

At the end of September Drax announced it was pulling out of its White Rose CCS pilot due to feasibility issues. Drax is also in the process of converting to biomass power.

Drax chief executive Dorothy Thompson told the BBC at the time that: “The most recent effect has been the government has removed a tax exemption for renewable power that is sold to industrial companies and we’re the largest generator of renewable power in the UK and this has suddenly removed a stream of income.”

“The day it was announced our share price dropped by a third and that simply reduces the amount of cash we have available for future investments.”

Drax was one of two CCS projects in the UK – the other is backed by Shell and SSE at Peterhead, which is now no longer going ahead.

Shell said yesterday that it will be focusing its CCS work 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.”

3. CCS “Essential” to Fracking

The government is committed to its ‘dash for gas’.

In the UK’s energy policy ‘reset’ announced on 18 November it laid out plans 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. Cancelling the CCS competition means this is no longer very likely.

And as you’ll remember, during the summer the Task Force on Shale Gas warned that if the government is serious about pursuing “climate-friendly” fracking, CCS is the only way to achieve that. (Well, that and investing in renewables so fracking can actually be a ‘bridge fuel’.)

As the Task Force’s report argued, the only way to exploit Britain’s shale gas resources in a climate-friendly way is by using CCS. While CCS doesn’t need to be a prerequisite for exploratory drilling, it will be “essential” if fracking develops at scale, it said.

Without CCS it’s unclear how gas can be a central part of the power system and the Government still be committed to tackling climate change,” said Dr Doug Parr, Greenpeace UK’s chief scientist and policy director.

4. Impact on UK Emissions Targets

We already know the UK is likely to miss its legally binding 2020 renewable energy target. Taken together with all the recent cuts to green initiatives, the implications for the UK‘s carbon emissions trajectory are huge.

The government’s independent Committee on Climate Change (CCC) is expected to publish recommendations today on interim emissions targets for the UK, which is committed to an 80 percent cut from 1990 levels by 2050.

The CCC agrees that CCS technology is critical to cutting carbon. As it 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.”

Cameron has also previously promoted CCS, having told a parliamentary committee a firm decarbonisation target depended on CCS being available. “If not, you are in quite serious water,” he said, “because you would be only relying on nuclear and renewables.”

Yet, here we are.

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.”

And as Sepi Golzari-Munro of think tank E3G warned, it has become “almost impossible” to meet carbon budgets.

5. CCS and the Paris Climate Conference

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 says 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.

Indeed, many future forecasts of emissions reductions assume CCS technology will play a significant role. Yet its progress has been glacial. There is only one CCS project operating on a commercial scale in Saskatchewan, Canada. Before Osborne’s announcement, the UK’s projects were also seen as leading initiatives in helping bring the technology to scale.

David Powell, a senior campaigner with Friends of the Earth, said: “With critical climate change talks in Paris just around the corner, George Osborne has shown he couldn’t be less interested in green investment and building a low-carbon future.”

Kyla is a freelance writer and editor with work appearing in the New York Times, National Geographic, HuffPost, Mother Jones, and Outside. She is also a member of the Society for Environmental Journalists.

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