Source · Select Committees · Public Accounts Committee
Recommendation 7
7
Not Addressed
Department and Treasury agree CCUS funding limits but recognise substantial contingent liabilities
Conclusion
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
Government Response 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 limits.
Government Response
Not Addressed
HM Government
Not Addressed
Introduction from the Committee Carbon capture, usage and storage (CCUS) technologies capture carbon before it is released into the atmosphere and store it permanently underground. They can be applied to a range of industrial applications, such as power generation and cement production. The government sees CCUS as essential to the UK achieving net zero by 2050. Previous governments have attempted to launch CCUS in the UK twice before, but these projects were cancelled in 2011 and 2016. The current approach, launched in 2018, aims to establish CCUS in geographical clusters. The government set a target of capturing and storing 20–30 million tonnes of carbon per year by 2030. In December 2024, it concluded that this target was not achievable. It has not yet set revised goals. The Department for Energy Security and Net Zero (the Department) is responsible for the CCUS programme. In October 2021, it announced that the first two clusters to receive government support (Track 1) would be HyNet, covering Merseyside and north Wales, and East Coast, covering Teesside and Humberside. HM Treasury announced up to £20.0 billion of funding in March 2023 to support the early deployment of CCUS. In October 2024 it increased the funding to £21.7 billion over 25 years to cover the first five projects. At the same time, the Department recognized contingent liabilities with a maximum value of £34 billion to cover the risks it is underwriting for the programme. In December 2024, the Department announced it had signed contracts with the first two projects at East Coast Cluster which it expects to begin operations in 2028.