Recommendations & Conclusions
26 items
2
Conclusion
8th Report - Carbon Capture, Usage and …
Accepted
While the Department is taking steps to incentivise efficient delivery of the CCUS projects, it has not established mechanisms to make sure that taxpayers and consumers will benefit financially should the programme be successful. The Department has developed a range of business models for applying CCUS to a range of …
Government response. The government agrees, stating that existing business models already include mechanisms like a 'gainshare' in the Net Zero Teesside Dispatchable Power Agreement to ensure financial benefit for taxpayers and consumers. The Department will continue to evolve these models, working with …
HM Treasury
3
Conclusion
8th Report - Carbon Capture, Usage and …
Accepted
The Department and HM Treasury have yet to assess the full financial impact of the CCUS programme on taxpayers and consumers. The costs of the CCUS programme are significant: in November 2024 the government announced £21.7 billion of funding over 25 years to cover only the first five CCUS projects. …
Government response. The government agrees and states that it already assesses the affordability of CCUS support as part of key policy processes and Spending Reviews. It highlights that rigorous assessments, in line with Treasury Green Book principles, have already been undertaken for …
HM Treasury
4
Conclusion
8th Report - Carbon Capture, Usage and …
Accepted
The Department and HM Treasury lack clarity on how they would take account of project underperformance and advances in scientific understanding as part of their ongoing assessment of the programme’s future. The Department had a clear set of five factors it considered when assessing the value for money of the …
Government response. The government agrees and is taking several actions regarding BECCS, including developing new sustainability criteria for future support, planning a consultation on a common biomass sustainability framework, commissioning BSI to develop GGR methodologies by mid-2025, and launching an independent review …
HM Treasury
5
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
To date, the Department has done little to ensure that government support for CCUS is directed to the sectors or locations where it will be essential for achieving net zero. CCUS is currently seen as the only way to decarbonise certain industries. For example, it is estimated that 60–70% 6 …
Government response. The government agrees, stating the recommendation has been implemented as the Department already sets out its rationale for supporting CCUS in various sectoral strategies and compares costs with alternative approaches to achieve net zero. It ensures resources are allocated to …
HM Treasury
6
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
The Department has downgraded its ambitions for the CCUS programme, stating that the original 2030 ambitions are no longer achievable. The current CCUS programme is the government’s third attempt to introduce the technology. Compared with previous attempts, the government is now more reliant on CCUS succeeding as it sees the …
Government response. The government agrees and outlines its plan to monitor and report on net carbon captured by CCUS projects once operations begin, detailing obligations for Transport & Storage Companies and capture projects to report capture rates, storage performance, and leakage to …
HM Treasury
1
Conclusion
8th Report - Carbon Capture, Usage and …
Accepted
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Energy Security and Net Zero (the Department) on its carbon capture, usage and storage programme.1
Government response. The government states it has already created business models to provide minimum subsidy, established a Cluster Sponsor Function to monitor progress and risks, and set up assurance and control mechanisms, including a new construction team with monthly reviews.
HM Treasury
7
Conclusion
8th Report - Carbon Capture, Usage and …
Not Addressed
A major factor in the failure of the second CCUS competition was the lack of agreement between the Department and HM Treasury on funding limits.15 The Department told us that this time it had agreed an affordability envelope with HM Treasury which has developed as the projects have matured.16 HM …
Government response. The government's response provides a general introduction to the CCUS programme, previous attempts to launch CCUS, the current approach, funding announcements and signed contracts with the first two projects. It does not directly address the conclusion about the Department and …
HM Treasury
8
Conclusion
8th Report - Carbon Capture, Usage and …
Accepted
Significant risks to the successful implementation of CCUS technology remain. There are still no CCUS plants operating at a commercial scale in the UK and the technology is unproven at the scale being planned.20 For example, written evidence we received stated that there are currently only two power stations worldwide …
Government response. The department has created business models that provide the minimum subsidy required, keeps the allocation of costs and risks under review to reduce subsidy, has established assurance and control mechanisms, created a new construction team and finance lead, and will …
HM Treasury
9
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
Given the scale of the funding announced for the first five projects and the size of the contingent liabilities that the Department has recognised for its underwriting of the programme, the potential costs to taxpayers and consumers are huge. The Department intends to manage the risks through a series of …
Government response. The department has created business models that provide the minimum subsidy required, keeps the allocation of costs and risks under review to reduce subsidy, has established assurance and control mechanisms, created a new construction team and finance lead, and will …
HM Treasury
10
Conclusion
8th Report - Carbon Capture, Usage and …
Acknowledged
The Department established business models on which to base its support for each of the projects in the programme’s Track 1.28 These models set out how costs and risks are distributed between the government and the project.29 The Department told us that it had separate business models for transport and …
Government response. The Department for Energy Security and Net Zero has created business models that provide the minimum subsidy required to support the projects, keeps the allocation of costs and risks under review with the aim of reducing subsidy over the long-term.
HM Treasury
11
Conclusion
8th Report - Carbon Capture, Usage and …
Acknowledged
Looking to the future, the Department told us it wants to move the balance of risk away from the government as the market for CCUS evolves.33 The Department’s current assessment is that, because projects are first–of–a– kind, there is an inherent risk [of failure] which the market will not take …
Government response. The Department for Energy Security and Net Zero has created business models that provide the minimum subsidy required to support the projects, keeps the allocation of costs and risks under review with the aim of reducing subsidy over the long-term.
HM Treasury
12
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
We asked the Department whether its business models allow for the government to take a share of any profit a project makes if the programme is successful.37 But the Department could not provide a compelling answer.38 Now that the Department has signed its first two contracts for carbon capture and …
Government response. The department will continue to evolve business models including mechanisms to ensure taxpayers and consumers benefit financially from the success of CCUS projects, including gainshare, and will work with the National Wealth Fund and Great British Energy to support delivery …
HM Treasury
13
Conclusion
8th Report - Carbon Capture, Usage and …
Not Addressed
In early October 2024, the government announced £21.7 billion of funding, over 25 years, to support the first five projects in Track 1 of its CCUS programme.43 In early December 2024, the Department signed contracts with two projects in the East Coast Cluster – a power project (Net Zero Teesside) …
Government response. The government's response provides a general introduction to the CCUS programme, previous attempts to launch CCUS, the current approach, funding announcements and signed contracts with the first two projects. It does not directly address the conclusion about the funding announcement …
HM Treasury
14
Conclusion
8th Report - Carbon Capture, Usage and …
Acknowledged
The Department told us it expects around three quarters of the allocation of financial support of almost £22 billion will be from levies on consumers (such as those using power generated by the Net Zero Teesside project).46 The remaining 25% will come from the Exchequer.47 However, the Department does not …
Government response. The department continuously assesses the affordability and value for money of government support for CCUS as part of key policy and decision-making processes, working with HM Treasury to assess benefits, taxpayer affordability, and energy bill impacts.
HM Treasury
15
Conclusion
8th Report - Carbon Capture, Usage and …
Not Addressed
The Department and HM Treasury have acknowledged that further funding will be required for the programme’s later stages, such as Track 1 expansion and Track 2 (which includes two more clusters).51 The Department told us that it is in “detailed discussion and dialogue with the projects involved in the core …
Government response. The government responds to a different recommendation (3) than the conclusion being made (15).
HM Treasury
16
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
The Department referred us to recent work from National Energy System Operator [NESO] on decarbonising the power system.53 It told us that NESO’s report, which concluded that CCUS was one of two pathways to a low–cost energy system, highlighted that the lowest cost system will include the use of dispatchable …
Government response. The Department and HM Treasury will assess whether the full CCUS programme will be affordable for taxpayers and consumers, with a target implementation date of Summer 2025.
HM Treasury
17
Conclusion
8th Report - Carbon Capture, Usage and …
Acknowledged
The Department began developing its current approach to CCUS in 2018, following two previous failures.58 The Climate Change Committee, which advises government on how best to meet its decarbonisation goals, considers CCUS to be essential for the UK to meet its legally binding climate ambitions, in Carbon Budget 6 (which …
Government response. The government provides background information on CCUS technologies and the UK's approach to achieving net zero, but doesn't directly address the specific ambitions for the CCUS programme mentioned in the conclusion.
HM Treasury
18
Conclusion
8th Report - Carbon Capture, Usage and …
Acknowledged
However, the Department has made slow progress in getting the first tranche of projects running. It had initially hoped to sign contracts with the first carbon capture projects in the second quarter of 2022, but this has been repeatedly pushed back.61 It also scaled down its ambitions for the first …
Government response. The government provides background information on CCUS technologies and the UK's approach to achieving net zero, but doesn't directly address the specific delays and scaling down of ambitions mentioned in the conclusion.
HM Treasury
19
Conclusion
8th Report - Carbon Capture, Usage and …
Acknowledged
In the latter part of 2024, the Department successfully concluded negotiations with two of the Track 1 projects. In December 2024, the Department announced it had signed contracts with the first two projects at East Coast Cluster: Net Zero Teesside (a gas–fired power station with 58 C&AG’s Report, para 1.5 …
Government response. The government provides background information on CCUS technologies and the UK's approach to achieving net zero, but doesn't directly address the specific negotiation successes and the revised target mentioned in the conclusion.
HM Treasury
20
Conclusion
8th Report - Carbon Capture, Usage and …
Not Addressed
When selecting which clusters to proceed with and which projects to select within each cluster, the Department assessed value for money against five criteria: deliverability; economic benefits; costs; carbon savings; and learning. Once the shortlist of Track 1 projects had been reached, the Department conducted a full value for money …
Government response. The government responds to a different recommendation (4a) than the conclusion being made (20).
HM Treasury
21
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
The Department recognised that there are some “contested views” concerning, for example, the effectiveness of CCUS in reducing emissions from gas–fired power stations.69 We received written evidence suggesting that there are higher levels of methane (a gas with significant greenhouse effects) leakage throughout the supply chain for liquified natural gas …
Government response. The government will reappraise on an annual basis its approach to assessing the value for money of CCUS projects, considering the impact of up-to-date scientific understanding. This appraisal has been implemented since the start of the CCUS programme and was …
HM Treasury
22
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
The original 2030 targets for the CCUS programme, which the government has now told us are unachievable, included a goal for the UK to achieve 5 mtpa of engineered greenhouse gas removals. The bulk of this was expected to be achieved by applying CCUS technology to a biomass energy plant …
Government response. The government agreed that any future support for BECCS will be accompanied by monitoring arrangements that provide real assurance that industry is meeting sustainability criteria, which will build on existing sustainability criteria for biomass, with target implementation in Summer 2025. …
HM Treasury
23
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
At present, CCUS technology is the only way to decarbonise industries that generate emissions from physical or chemical processes, rather than from the combustion of fuels. For example, 60 to 70% of emissions from the cement industry come from chemical reactions during production.78 We received written evidence stating that while …
Government response. The government agreed to set out its rationale for supporting CCUS in each sector where it could be applied, including considering whether alternative approaches could be more cost effective, referencing various sectoral strategies and analysis. Separately, an independent review will …
HM Treasury
24
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
In other sectors, there are viable methods to decarbonise that do not require CCUS. For example, the Department told us that CCUS could play a particularly important role in power generation.80 However, there are other ways that the UK could decarbonise the power sector. A recent report by the National …
Government response. The government agreed to set out its rationale for supporting CCUS in each sector where it could be applied, including considering whether alternative approaches could be more cost effective, referencing various sectoral strategies and analysis. Separately, an independent review will …
HM Treasury
25
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
The Department’s approach to date has been focused on rolling out CCUS to geographical clusters. The Department told us that its cluster–based approach makes sense in terms of cost–efficiency as fewer and shorter pipelines need to be built and because there will be multiple emitters at each cluster that can …
Government response. The department has already set out the relative role of CCUS in decarbonising sectors in various sectoral strategies and regularly updates its analysis as part of the carbon budget delivery cycle, ensuring that CCUS resources are allocated where few alternatives …
HM Treasury
26
Recommendation
8th Report - Carbon Capture, Usage and …
Accepted
However, there is no guarantee that the industries most in need of CCUS will be located in a geographical cluster.85 A cement plant was short–listed for Track 1 in March 2023, but as yet government has not agreed terms with it.86 The Department told us that it was aware of …
Government response. The department has already set out the relative role of CCUS in decarbonising sectors in various sectoral strategies and regularly updates its analysis as part of the carbon budget delivery cycle, ensuring that CCUS resources are allocated where few alternatives …
HM Treasury