Carbon capture and storage - Energy and Climate Change Contents

3  Conclusion

72. CCS is one of the only technologies available that has the potential to decarbonise fossil fuel power plants and other industrial processes. The capture, transport and storage technologies involved are considered to be safe, the scientific and engineering challenges small and the capacity to be deployed at scale promising. New and novel CCS technologies, such as the NET Power cycle, have the potential to improve CCS prospects. It is widely acknowledged that CCS could play an important role in helping the UK to meet its carbon reduction commitments. This role may change over time to take account of global policy developments including the 21st Conference of the Parties in 2015. Although CO2 emissions have reduced in this country and the EU, the carbon footprint of both has increased. If CCS was widely adopted abroad, it could help to reduce the UK's embedded carbon emissions. Deploying CCS in the UK could also increase UK plc's future share of the global CCS market, create a North Sea "storage market" whereby the service of permanently storing CO2 was sold to other European countries, and protect jobs associated with the UK's coal and energy intensive industries. The UK is considered ideally suited to take advantage of CCS because of its combination of geological, engineering, industrial and academic capabilities, together with a stated policy commitment to reduce CO2 emissions and the foundational legislative framework required for CO2 storage.

73. The combination of high energy and-in the absence of an effective carbon market-financial costs make CCS uneconomic. The high cost of CCS means that it is likely to develop only in response to specific policy intervention, likely to be subsidy from the public purse and/or the consumer. The Government should be transparent about the costs of CCS and how they will be met. The Government therefore needs to prioritise designing a credible financial incentive framework most likely centred on the Contracts for Difference which the Government is introducing as part of its electricity market reforms. Progress on CCS in the UK has been frustratingly slow. It has taken successive governments the best part of a decade to provide a capital grant to a large-scale full chain CCS project. As a result, the expected start date of CCS has been pushed back from 2014 to potentially after 2020 which has increased uncertainty and threatens to undermine the credibility of Government policy. This lost decade is regrettable given the importance of CCS to meeting future climate change targets.

74. In order to ensure the successful deployment of CCS in the UK the Government should aim to reach final investment decisions with the two projects left in the competition by early 2015 (in line with the Government's original competition timetable) to increase the chance that the first CCS projects will be operational before 2020. This commitment is welcome: it will help to bring down costs of CCS more quickly and, therefore, help the development of a wider CCS industry in the UK.

75. It is unclear whether any financial advantage accrues to first movers, so there is a case for limiting the amount of consumer support which is allocated to the first CCS projects. Indeed, it is likely that most benefits will be accrued by second movers, which may explain why the big companies are reluctant to spend so much of their own money at this early stage of CCS development. It would be wise for the Government to direct its resources at the uniquely British aspects of CCS deployment such as transport and storage infrastructure and overcoming potential public opposition to ensure the maximum benefits for UK consumers are realised.

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Prepared 21 May 2014