Treasury’s decision to axe funding for carbon capture and storage (CCS) could lead to higher carbon costs for businesses and further erode investor trust in the UK government.
The National Audit Office’s assessment of the decision to scrap a £1bn competition for CCS last Autumn also warns that delaying the deployment of CCS may mean some offshore carbon storage sites are no longer available.
Former Chancellor George Osborne cut the finding in the spending review. Treasury thought it was too expensive and that better uses for the money could be found.
While CCS is commercially unproven at scale, it is seen by many as central to the UK’s hopes of meeting climate targets while retaining industry. The competition was intended to speed commercial development and it is estimated that the private companies developing the schemes had already invested some £80m, alongside £100m from the public purse. Investors would be less trusting of government having had CCS funding cancelled twice, said the NAO.
It said that other potential side-effects from the decision would be a loss of skills and knowledge. Businesses, it warned, would have to buy more carbon permits and remain exposed to price volatility in the absence of CCS.
See the assessment here.