Labour’s carbon capture gamble could end up as a £22bn fossil fuel subsidy
Rachel Reeves’s first Budget as Chancellor is expected to announce tax rises and budget cuts to plug a “£22bn black hole”.
But one area where there will be a big boost in public spending is carbon capture and storage (CCS).
Reeves is expected to set out more details following Labour’s controversial announcement of a £21.7bn investment in CCS.
To its proponents, the money represents a bold investment in the transition to net zero that will create thousands of green jobs in old industrial heartlands.
But to sceptics, the funding is merely a “subsidy for the fossil fuel industry” that could lead to billions in taxpayer money being wasted on “speculative ventures”.
CCS is a process that sees carbon dioxide separated from gases produced during industrial processes, for example at coal and gas-fired power plants or steel and cement factories.
The CO2 is transported via pipelines and stored permanently deep underground.
Earlier this month, the Government pledged to spend up to £21.7bn to help get the UK’s first carbon capture and storage projects up and running.
The funding, which will be spent over 25 years, will support two undersea carbon storage sites and pipelines. One, in Liverpool Bay, is being developed by Italian oil giant Eni, and the other, off the coast of Teeside, is being developed by BP, Equinor and TotalEnergies.
Three industrial projects will also receive funding to attach carbon capture technology to their sites. These include a gas-fired power station being developed by BP and Equinor in Teeside, an energy-from-waste plant being developed by Encyclis and Biffa in Cheshire, and a hydrogen production plant being developed by Indian energy firm Essar, also in Cheshire.
Many experts, including the Climate Change Committee, say CCS has an important role to play as the UK transitions to net zero, particularly for hard to decarbonise industries like steel-making.
But others argue the technology is a costly distraction that is extending the life of the fossil fuel industry.
Last month a group of over 20 climate scientists from the UK and the US wrote to the Labour Government asking it to pause plans to invest billions in CCS technologies until the evidence regarding their efficacy is fully evaluated.
David Cebon, a professor of mechanical engineering at Cambridge University and one of the signatories, told i CCS is “unproven and far too expensive”.
“It’s very strange that a Government which is complaining it’s got a major deficit in its funding would make a commitment to fund the fossil fuel industry,” he said.
“We’re in a race here. We need to move as quickly as possible and to be putting billions of pounds into speculative ventures… is complete folly.”
But Laith Whitwham, senior policy adviser at the climate think-tank E3G, said carbon capture will be “crucial” for certain sectors that are hard to decarbonise, such as cement or steel-making.
While he said some of the CCS projects being invested in by the Government are “welcome”, he criticised the decision to use the technology on a gas-fired power station in Teeside, arguing it “will lock in fossil fuel for years”.
He argued using CCS on power stations will “keep the UK hooked on imports of gas” when we already have a solution to decarbonise power in the form of renewable energy.
Jim Watson, professor of energy policy at UCL Institute for Sustainable Resources, said that “we are going to have to capture a fair amount of carbon to meet our net zero target by 2050” in industries like steel. But he questioned whether we should be using carbon capture on power plants.
He said there was still “a lot of uncertainty” on how exactly the Government plans to spend the £21.7bn and is hoping for more clarity in tomorrow’s Budget.
“This seems like quite a lot of money for what it’s paying for, but it’s really ambiguous as to exactly how extensive the pipeline networks are going to be that are built.”
Professor Watson said that there was a “big level of risk” with investing so much in CCS infrastructure, but added that the Government seems to be “planning ahead”.
While experts disagree on the role CCS should play in the transition to net zero, everyone i spoke to said there are other areas the Government should prioritise when making investments.
Mr Whitwham would like to see the Government focus more on the electrification of industry, which he said is a cheaper and more sustainable option for most sectors.
Mr Cebon said there are three areas ministers should focus investment in: renewable energy, upgrading the electricity grid and rolling out heat pumps in people’s homes.
Labour does have plans to invest in these areas, but the exact balance of spending remains unclear.
“There are choices obviously, especially at the moment given how tight budgets are,” Mr Watson said.
“If they are going to go ahead with this, I would like to see this matched by other types of infrastructure investment and in particular, investment in peoples homes… Of course we’ll have to wait until tomorrow to see what they say on that.”
