Recommendations & Conclusions
6 items
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
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
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