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 …
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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 sectors. The models form the basis of negotiations between the Department and the private sector 4 and outline how risks will be allocated between the different parties and set the payment mechanism. While the projects will receive the bulk of taxpayer and consumer support only when they are operational, the sums involved are substantial. Should the programme be successful, projects might eventually earn significant profits that are partly a result of early public support. Neither of the two contracts that the Department has already signed include any provision for the government to share profits or take an equity stake, or for consumers to benefit from lower energy bills should things go well. Nor does the Department seem to have considered any such ‘gainshare’ mechanisms when negotiating with the Track 1 projects. recommendation For all future CCUS projects, the Department should introduce mechanisms to make sure taxpayers and consumers benefit financially from the success of the projects they have supported financially.
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Government response AI summary
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 the National Wealth Fund and …
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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. …
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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. There are three more projects that are still under negotiation as part of Track 1, an unquantified number of additional projects that are expected to join the HyNet and East Coast clusters as part of Track 1 expansion, and all the projects that will join the Track 2 clusters at Peterhead and Humberside. The Department has not indicated the likely cost of these projects. The Department and HM Treasury expect that around 75% of the cost of supporting these early projects will be met by levies on consumers who are already facing significant financial pressures, with the remainder funded by the Exchequer. Drawing on a recent report from the National Energy System Operator (NESO), the Department has concluded that supporting the deployment of CCUS in gas–fired power stations offers lower costs compared to alternatives. But NESO also concluded that this approach would require more upfront financial support. The Department has not looked at the likely financial impact on bills of the full CCUS programme at a time when households are already facing high energy prices. recommendation The Department and HM Treasury should assess whether the full CCUS programme will be affordable for taxpayers and consumers, given wider pressures on energy bills and costs of living. 5
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Government response AI summary
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 the initial phases of the …
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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 …
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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 first two clusters and then the individual projects it selected as part of Track 1 of the programme. The Department and HM Treasury were also clear that projects would be subject to a further value for money assessment before awarding contracts. As part of this assessment it would consider the cost effectiveness of capturing carbon and wider economic issues such as investment in particular regions. But some recent scientific evidence suggests that producing liquid natural gas (which will be used to run several CCUS projects, such as Net Zero Teesside) leaks more methane, a potent greenhouse gas, into the atmosphere than previously thought. As CCUS will not reduce these ‘upstream’ emissions, this could undermine the rationale for pursuing certain projects. The government also expects bioenergy with carbon capture (BECCS) to play a significant role in providing negative emissions to offset residual emissions in other sectors. However, the National Audit Office has previously concluded that the government could not demonstrate the adequacy of monitoring arrangements for its existing schemes to support bioenergy in giving it confidence industry was meeting sustainability standards. In addition, Ofgem’s critical findings in its recent investigation on Drax (which has received more than £6 billion of public funding over the last two decades) over its approach to reporting against sustainability criteria, have raised concerns over whether BECCS offers a genuine path to reducing emissions. We are therefore concerned that any government support for BECCS at Drax will not necessarily support its net zero ambitions and are minded to examine further the issue soon. If not a
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Government response AI summary
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 into GGRs.
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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 …
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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 of carbon emissions from the cement industry comes from chemical reactions. The government sees CCUS at the only means to prevent these from being released into the atmosphere. Projects producing energy from waste are also reliant on CCUS due to the lack of alternate green energy sources. Other applications for CCUS capture carbon from the burning of fuels and there can be alternative methods to decarbonise these processes (for example, through electrification). However, the Department’s current cluster–based approach focuses on supporting carbon capture projects that are located close to one another. While this makes sense in terms of maximising the use of infrastructure such as pipelines, it does not ensure that financial support for CCUS is directed at the sectors which will need it most. The Department has not decided how it will support the use of CCUS at sites outside of industrial clusters, known as dispersed sites. recommendation The Department should 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.
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Government response AI summary
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 sectors with few alternatives and …
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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 …
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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 technology as essential to achieving net zero by 2050. But over the course of the CCUS programme’s development, the Department has reduced its expectations of the carbon that will be captured and stored by the first wave of projects, known as Track 1. Its progress has also been slower than planned: the government recently agreed financial terms with two projects in the East Coast Cluster, around two years later than scheduled. In December 2024, the Department concluded that its target to capture 20 to 30 million tonnes of CO2 annually by 2030 will not be met. It has yet to announce revised targets for the programme. The 2030 ambitions for the CCUS programme were aligned with the government’s pathway for meeting the decarbonisation goals for Carbon Budget 6 (2033–2037). As these targets have now been abandoned, it is not clear by what alternative means government will meet these legally binding goals. 7 recommendation a. The Department should set out, as a matter of urgency, new targets for how much carbon it intends to capture through its CCUS programme and by when, and make clear how it will make up the shortfall created in its overall net zero pathway. b. The Department should consider how it will monitor and report on the performance of CCUS projects in relation to the amount of net carbon captured. 8 1 Protecting taxpayers and consumers interests Introduction
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Government response AI summary
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 relevant regulators. It has also …
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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 AI summary
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.
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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 …
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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 Treasury announced up to £20.0 billion of funding in March 2023 for the early deployment of CCUS17 and made a further announcement in October 2024, increasing the funding to £21.7 billion over 25 years and specifying that this was to cover the first five projects.18 In November 2024, the Department recognised contingent liabilities with a maximum value of £34.4 billion and a ‘reasonable worst–case’ value of £14.3 billion. These potential liabilities cover the risks the Department is underwriting for the CCUS programme.19
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Government response AI summary
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 agreeing on funding …
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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 …
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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 using post–combustion carbon capture. Neither of these plants have achieved a 90% capture rate, which is the threshold set for CCUS by the previous government’s Industrial Decarbonisation Strategy.21 We also note that, while there has been no leakage from the two undersea carbon storage sites in Norwegian waters, the stored carbon dioxide has not behaved as expected.22 The Department told us that the Norwegian carbon stores were filled with carbon much more slowly than the Department is planning for the UK.23
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Government response AI summary
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 carry out monthly reviews reported …
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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 …
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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 business models that it has developed for each sector that CCUS 14 Q 12 15 C&AG’s Report, para 1.5 16 Q 12 17 C&AG’s Report, para 14 18 Government reignites industrial heartlands 10 days out from the International Investment Summit – GOV.UK 19 Written statements – Written questions, answers and statements – UK Parliament Statement HCWS211, 13 November 2024 20 C&AG’s Report, paras 1.5 and 3.4 21 CCUS0007 22 CCUS0014 23 Qq 9–10 11 may be deployed in.24 It told us that these models are structured in such a way that, apart from very small grants worth less than 2% of the overall funding envelope, the projects in the CCUS programme will only be paid once they are operating.25 It also intends to structure the contracts in such a way that projects will receive lower payments if they are not meeting certain criteria, and could be cancelled in extreme cases of under–performance.26 As yet, none of these business models or contracts have been tested in practice.27 Securing future financial returns
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Government response AI summary
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 carry out monthly reviews reported …
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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 …
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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 storage, and then for different types of emitter, such as power.30 It told us that its approach enabled it to bring in investors which were suitable for different parts of the programme and to allocate risks more effectively.31 The Department also told us that the business models have been designed so a project is only paid once it is capturing carbon which is then stored. 32
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Government response AI summary
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.
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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 …
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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 on and therefore its support is appropriate.34 The Department wants to move away from projects financially backed by the government.35 It wants to establish what it describes as a self–sustaining “…commercial and competitive market…” for CCUS from 2035.36 24 C&AG’s Report, para 18 25 Qq 15–16 26 Q 27 27 Q 56 28 C&AG’s Report, para 2.2 and Figure 6 29 C&AG’s Report, para 2.2 and Figure 6 30 Q 12 31 Q 12 32 Q 27 33 Q 74 34 C&AG’s Report, para 3.17 35 C&AG’s Report, para 3.17 36 Q 74; C&AG’s Report, para 3.17 12
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Government response AI summary
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.
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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 …
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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 storage, this will produce an “incredibly better investment” scenario for the private sector in the second tranche, which should encourage the Department to think about, for example, profit shares and equity stakes.39 HM Treasury hopes that the government agreeing support for projects in the programme’s Track 1 will provide industry with confidence over the government’s long term commitment to CCUS.40 The Department told us that it would be “looking very carefully at the economics of the developers and the investors, including what benefit they accrue from the projects…”.41 The Department assured us “that [was] exactly the sort of thing [it] is considering in an open–minded way.” 42 Assessing the programme’s affordability
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Government response AI summary
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 and drive value for money, …
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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) …
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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) and a transport and storage company (Northern Endurance Partnership).44 The Department told us the East Coast Cluster covered the largest region of emissions.45
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Government response AI summary
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 for Track 1 projects.
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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 …
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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 yet know the precise balance of funding between the consumer and taxpayer as this will depend on the final terms of the contracts it signs with projects.48 And uncertainty remains around the funding available 37 Q 72 38 Q 73 39 Q 74 40 C&AG’s Report, para 3.16 41 Qq 73 42 Qq 73 43 Qq 1, 17 44 Q 1 45 Q 1 46 Q 17 47 Q 17 48 Q 17 13 for future stages of the CCUS programme.49 Regardless of whether the programme is taxpayer or consumer funded, the cost of the programmes is “a cost to the country”.50
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Government response AI summary
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.
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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 …
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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 of Track 1, the Track 1 expansion, the other projects in the East Coast cluster and Track 2.” 52
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Government response AI summary
The government responds to a different recommendation (3) than the conclusion being made (15).
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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 …
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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 low–carbon power generation such as power CCUS.54 CCUS did not feature in the other pathway.55 The Department told us that NESO’s analysis showed that low carbon dispatchable power, such as power CCUS, could lead to lower cost for the power sector than a system just based on renewables.56 But NESO’s report also concluded that CCUS–enabled gas would require more upfront financial support.57 49 C&AG’s Report, para 14 50 Q 21 51 C&AG’s Report, para 3.16 52 Q 58 53 Q 21 54 Q 21 55 Q 21 56 Q 43 57 National Energy System Operator, Clean Power 2030: Advice on achieving clean power for Great Britain by 2030, November 2024. 14 2 Adapting the programme over time Downgrading ambitions
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Government response AI summary
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.
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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 …
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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 covers 2033–37) and to achieve net zero by 2050.59 In October 2021, the Department set its ambitions for the CCUS programme based on its own assessment of how to meet these goals: to have two carbon capture clusters operational by the mid–2020s and four operational by 2030; for these clusters to capture 20–30 mtpa of carbon by 2030; to have at least one power station with CCUS running by 2030; and to capture at least 5 mtpa of carbon through engineered greenhouse gas removals by 2030.60
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Government response AI summary
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.
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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 …
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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 wave of projects. In the summer of 2022, it considered the scale of storage required for HyNet and East Coast (the ‘Track 1’ clusters) and initially settled on the larger option of 15.5 mtpa as this was aligned with its 2030 targets. However, it subsequently reversed this decision and the eight Track 1 projects it short–listed in March 2023 would only capture a total of 4.9 mtpa.62
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Government response AI summary
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.
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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 …
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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 and Figure 2 59 C&AG’s Report, para 1.8 60 C&AG’s Report, para 1.7; HM Government, Net Zero Strategy: Build Back Greener, October 2021, pages 21 and 28. 61 C&AG’s Report, para 2.15 62 C&AG’s Report, para 2.8 – 2.10 15 CCUS); and Northern Endurance Partnership (the transport and storage company for the East Coast Cluster).63 Shortly before our evidence session, the Department stated that it no longer considered its target of capturing 20–30 mtpa of CO2 for 2030 achievable.64 The Department told us it will set out its revised ambitions for the future of CCUS in its Carbon Budget Delivery Plan, due for publication in spring 2025.65 Challenging assumptions
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Government response AI summary
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.
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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 …
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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 assessment, following Green Book guidance.66 In terms of assessing the first–of–a–kind risks, the Department told us that it completed a technical assessment on all the projects and that these were subject to several Gateway Review stages.67 While we understand that the Department has designed its business models with the intention that payments are only made once projects are operational and meeting certain parameters, this does not mitigate the risk that the project should not have been supported in the first place68
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Government response AI summary
The government responds to a different recommendation (4a) than the conclusion being made (20).
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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 …
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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 (LNG) than previously thought. Given that the UK’s LNG production is winding down, more LNG is likely to be imported from countries like the USA, lengthening the supply chain and worsening the risk of leakage. Methane leakage during production and transportation of LNG are ‘upstream emissions’ that will not be addressed by CCUS and might have a greater climate impact than the actual burning of the gas at a power station.70 The Department told us that there are contested views in this space and 63 Contracts signed for UK’s first carbon capture projects in Teesside – GOV.UK 64 Letter from Minister of State for Industry dated 11 December 2024; and Letter from DESNZ to PAC dated 21 January 2025. 65 Q 7 66 Q 24 67 Q 25 68 Q 27 69 Q 4 70 CCUS0018 16 that issues such as methane leakage will need to be looked at through the broader perspective of Carbon Budgets, rather than through the CCUS programme.71
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Government response AI summary
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 implemented most recently via Full …
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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 …
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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 (a process known as BECCS).72 There are no BECCS projects included in Track 1, but the Department told us that it remained under consideration for its future plans.73 Ofgem administers the existing government support for large biomass generators, including overseeing an assurance regime intended to ensure that they only burn sustainably sourced biomass.74 However, an Ofgem investigation into Drax, which had received £6.5 billion in public funding between 2002 and 2023 and is by far the largest biomass plant in the country, found in August 2024 that there was an absence of adequate data governance and controls in place that had contributed to, amongst other things, to Drax being unable to support the reliability of its profiling data reporting of forestry type and sawlogs for Canadian consignments.75 Earlier in 2024, a National Audit Office report on the government’s support for biomass concluded, more broadly, that the government could not demonstrate that its current arrangements were adequate to give it confidence industry was meeting sustainability requirements.76 If not all of the materials used were meeting the government’s own sustainability standards this would be unacceptable. We also received written evidence suggesting that the application of carbon capture technology to biomass power generation is effectively untested on a commercial scale, as all real–world experience to date has been on coal–fired stations, which are substantively different.77 We also note the issues caused by international accounting principles for carbon emissions. If materials are exported from another country, it is that country that has to report the emissions. The absurdity of this is if the UK sou
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Government response AI summary
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. The department plans to consult …
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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 …
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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 there are currently no operational cement plants using CCUS anywhere in the world, there is a commercial–scale plant currently under construction in Norway.79
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Government response AI summary
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 consider how Greenhouse Gas Removals …
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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 …
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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 Energy System Operator (NESO) identified an alternative pathway to achieving clean power by 2030 that involved “no new dispatchable power from hydrogen or gas with CCS”.81 The Department told us that it would shortly be publishing an action plan in response to the NESO report and noted that the report identified the pathway with new dispatchable power as offering lower overall costs.82
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Government response AI summary
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 consider how Greenhouse Gas Removals …
Read full response →
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 …
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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 use the same transportation and storage infrastructure.83 To support this approach, the Department has focused on developing business models to support the deployment of CCUS in a range of sectors: heavy industry; in the production of blue hydrogen; in the waste sector (such as producing energy from waste); on power generation; for greenhouse gas removals; and BECCS.84
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Government response AI summary
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 exist and where it is …
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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 …
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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 a proposed cluster in 78 Qq 20 and 46 and C&AG’s Report, para 1.4 79 CCUS0003 80 Q 46 81 National Energy System Operator, Clean Power 2030: Advice on achieving clean power for Great Britain by 2030, November 2024. 82 Qq 21–23 83 Qq 12 and 39 84 Qq 71–72 and C&AG’s Report, Figure 7. 85 Q 39 86 Q 73 and Cluster sequencing Phase–2: Track–1 project negotiation list, March 2023 – GOV.UK 18 the Peak District that would allow CCUS to be applied to cement production, but that this was not included in Track 1 or Track 2.87 The Department refers to emitters outside clusters as ‘dispersed sites’.88 Dispersed sites are not well–suited to using pipelines to transport captured carbon and would instead need to be transported by rail or road.89 The Department has yet to decide how it will support the deployment of CCUS at these sites and is consulting with industry.90 87 Q 49 88 C&AG’s Report, para 1.6 89 Qq 39 and 41 90 C&AG’s Report, para 3.17 19
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Government response AI summary
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 exist and where it is …
Read full response →
HM Treasury