UK Government commits £21.7bn to carbon capture and storage

The UK Government has announced a commercial agreement to fund two major carbon capture sites in the North West and North East of England.

The announcement confirms up to £21.7 billion ($29 billion) will be made available over 25 years to develop CCUS and hydrogen in the Teesside and Merseyside industrial clusters.

The government expects to bring in £8 billion ($10.5 billion) of private investment into these communities through this initiative, thereby supporting economic growth, industrial development and long-term job creation.

The planned projects include the East Coast Cluster and HyNet North Cluster, which according to the Department of Energy Security and Net Zero, will help remove over 8.5 million tonnes of carbon emissions each year – the equivalent of taking around 4 million cars off the road.

Prime Minister Keir Starmer said: "Today’s announcement will give industry the certainty it needs – committing to 25 years of funding in this groundbreaking technology – to help deliver jobs, kickstart growth, and repair this country once and for all."

The announcement comes in the same week that the UK's last coal-fired power plant shut its doors for the last time, signalling the country's shifting focus to decarbonisation. It also comes ahead of the Autumn Statement due at the end of October, which will accompany an updated industrial strategy framework.

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The role of the private sector

The announcement highlights the important role of private sector investment in achieving success in projects such as these.

The government's backing of these two sites is intended to send a clear signal to investors that the UK is open for business.

Chancellor of the Exchequer Rachel Reeves said: "Working in partnership with business is at the heart of our plan to deliver strong growth and investment, so we can rebuild Britain and make everyone better off."

Louise Kingham, SVP Europe and head of country, UK for bp, added: "Collaboration is key in helping to progress and deliver the energy transition in the UK, and we look forward to continuing to work alongside the government and our partners to move these innovative projects forward."

According to Eni CEO, Claudio Descalzi, the news shows commitment from government to work with industry to drive energy transition. "This commitment is clear evidence of how governments and industry can work together to implement pragmatic and effective industrial policies, in order to accelerate decarbonisation."

Not all reaction to the news has been without a cautionary message.

Lorenzo Sani, power analyst at think tank Carbon Tracker, suggests the government is merely repeating the mistakes of the past.

Said Sani in an exclusive comment to Power Engineering International: “The government's decision repeats the previous administration's mistakes by committing new funding without first reassessing its CCUS strategy, which remains anchored in outdated and overly optimistic cost assumptions. Without this critical review, there’s a real risk of wasting even more taxpayer money on carbon capture projects that are both high-risk and not futureproof.”

“While this could be good news for the industry it is very concerning that two-thirds of the potential projects are focused on gas-based CCUS projects for blue hydrogen production and gas-CCS power plants. The reliance on gas-based carbon capture projects is deeply concerning, as it perpetuates the toxic link between volatile gas prices and energy bills. Moreover, these projects risk increasing emissions by relying on highly polluting imported liquefied natural gas (LNG). Hydrogen produced from imported LNG could be three times more carbon intensive than reported by the industry.”

“We urge the government to target these new subsidies towards sectors with no other alternative to decarbonise, such as cement, and avoid applications that perpetuate and extend reliance on fossil fuels such as gas power plants with carbon capture and blue hydrogen. Contrary to the Prime Minister’s view these solutions are not the future, on the contrary, they extend the UK’s toxic reliance on volatile, costly and polluting natural gas imports”

Prof Stuart Haszeldine, professor of Carbon Capture and Storage at the University of Edinburgh, also provides caution in terms of government's next steps. "Anticipating successful CCS operating projects, the UK government now needs to plan future CCS projects to operate without government grant support. Existing policies are mis-directed to pay for permissions to emit. What is needed for the future is a payment reward for storage of CO2. That can be achieved by an extended obligation on oil company suppliers of fossil carbon to capture and store CO2 emissions arising from their products. That principle was legally established for development of new oilfields in the UK Supreme Court ‘Finch’ case in June 2024."