Carbon capture usage and storage: third time lucky? Contents

3Industrial opportunities

Export potential

20.The UK is uniquely well-placed to develop CCUS. The national geological storage resource is estimated at around 70 billion tonnes of carbon dioxide—equivalent to that of the remaining EU-27 combined—and the supply chains that have grown to service our world-class oil and gas sector provide the capabilities that CCUS deployment demands.63 Furthermore there are several CCUS projects around the UK that are at an advanced stage of development, and which—with policy support—could commence operations from the early 2020s.64 In combination, these factors mean that the UK has strong potential to become a world leader in this technology.

21.The Paris Agreement is expected to increase future demand for carbon storage services, assuming that signatories seek to honour their commitments. International Energy Agency projections indicate that the future global CCUS market could be worth over £100 billion per year by 2050, and the Carbon Capture and Storage Association has estimated that UK gross value added resulting from our share in this market could reach between £5bn and £9bn per year by 2030.65 Despite this potential, CCUS remains a relatively immature technology, with only 18 large-scale facilities operating worldwide.66 Professor Jon Gibbins, Director of the UK CCS Research Centre, explained that the small size of the current market strengthens the potential for UK leadership:

“if the UK spent—pick a number—£5 billion on CCS, the world would sit up and take notice and you would have made a very material contribution to progress on climate change because nobody else is doing CCUS… If the UK spent £5 billion on nuclear… [or] on renewables … the world would barely notice.”67

22.Industry and academic groups are nonetheless concerned that the UK’s slow progress in developing this technology could mean that we soon lose any early-mover advantage.68 Substantial government support has been made available to develop full-chain CCUS projects in several countries, notably Japan, the USA and Canada.69 Leads taken by competitors in the North Sea region, particularly Norway and the Netherlands, could impinge on the UK’s ability to capture potential revenue from CCUS imports (providing storage as service to neighbouring countries).70 The Port of Rotterdam is aiming to store two million tonnes of carbon dioxide per year from 2021, whilst the Norwegian Government is supporting Equinor to develop the world’s first storage site to receive carbon from multiple sources, and is taking on liabilities for carbon dioxide leakage.71 A failure by the Government to develop CCUS facilities soon could also weaken the competitive edge of UK industry clusters against clusters abroad; for example we heard this would exacerbate already strong competition between Teesside and Rotterdam.72 The UK’s storage and supply chain resource strengths mean that we have a unique opportunity to lead the world in the development of a new CCUS industry. The Government should not allow the UK to pass this opportunity up. We recommend that the Government prioritise the development of CCUS to benefit from growing international demand for low carbon products and services-building on the UK’s existing successes with offshore wind.

Domestic opportunities and challenges

23.The Committee on Climate Change has advised that industrial emissions must reduce by 25% by 2030, with further reductions required through the 2030s and 2040s to hit national climate change targets. But as the Government’s Industrial Decarbonisation Roadmap recognises, there are few options to decarbonise many industrial processes.73 We heard from industry groups that CCUS will be critical to the future of energy intensive industries, both as a means to produce low-carbon hydrogen for use as a fuel, and to remove carbon directly from their waste streams.74 It is anticipated that many heavily emitting industries would need to close if the UK sticks to its climate change targets but CCUS fails to materialise.

24.The high costs of CCUS present a major barrier to adoption by industries that will need to remain internationally competitive. The Chemicals Industry Association, Tata Steel and the Northern Powerhouse 11 emphasised the need for substantial policy support to enable industries such as petrochemicals, steel and biofuels to implement CCUS.75 Peter Quinn, Head of Environmental Policy and Strategy at Tata Steel, cautioned against the unilateral imposition of further costs on UK industry, noting that existing carbon prices already present a “huge” cost on British production of globally-traded materials.76 Further, we heard in Teesside that the growing internationalisation of industrial facilities, many of which are foreign-owned, means that companies are becoming increasingly mobile and able to (re)locate facilities abroad should UK sites become less commercially attractive. This strengthens the case for developing CCUS industry clusters (to compete against CCUS-equipped clusters abroad), as well as for Government support to ensure that the additional costs do not disadvantage early-moving UK-based industries. The majority of energy technologies have benefited from subsidies in their early years, to reduce the effects of negative externalities and support the move from fledgling technology to commercialisation. We believe that support for CCUS—an innovative technology expected to be critical to tackling climate change—is also justified on these grounds.

25.Industry and research organisations are frustrated that CCUS policy discussions have historically focussed on costs rather than benefits.77 They argued that inadequate attention has been paid to the potential to create gross added value in industry clusters, for example through enhanced oil recovery; diversification of North Sea oil and gas industries; construction and operation of cluster hydrogen networks; and development of new low carbon products utilising captured carbon.78 These are in addition to the benefits of extending the lifetime of heavy industries, and the potential for CCUS exports. Summit Power has estimated that creation of an east-coast CCUS network could create 225,000 jobs and boost the UK economy by over £160 billion by 2060.79 We heard that although appreciation of benefits is slowly spreading across Government departments, the ongoing focus on costs may be hindering progress in developing CCUS support.80 Mark Lewis, Technology and Innovation Manager at Tees Valley Combined Authority, explained that in meetings “we have always had to re-educate them [the Treasury] because they did not understand what the benefits of this technology were”.81 We recommend that the forthcoming Comprehensive Spending Review take account not only of CCUS’ costs, but also its wider benefits-notably to extend the lifetime of heavy industries which will otherwise need to close under the requirements of the Climate Change Act.

26.One policy area in which the potential benefits of industrial CCUS have clearly been ignored is the National Infrastructure Assessment. Whilst this considered the role of CCUS in decarbonising power and heating (through hydrogen), its potential to decarbonise industrial emissions was out of scope.82 The result is that no nationwide cost-benefit analysis of industrial CCUS has been conducted. Given that the Committee on Climate Change has identified CCUS as critical future infrastructure for the UK, this omission was a major oversight. It is especially significant since CCUS infrastructure is expected to link up capture plants at a wide range of facilities once built: power, hydrogen and industrial plants could all potentially share the same transport pipelines and storage sites. It is therefore possible that the exclusion of industrial facilities could also have affected the Assessment’s cost benefit analysis of CCUS at power and hydrogen facilities, if it was assumed that these would alone shoulder the full cost of transport and storage infrastructure. We recommend that the Government tasks the National Instructure Commission—or a third party—to conduct a cost benefit analysis of the potential role of CCUS to decarbonise industrial emissions, taking account of how development of industrial CCUS would affect—and be affected by—the potential development of CCUS for other applications, notably hydrogen and power. The results of this assessment should be taken into account during decision-making on spending for national infrastructure.

64 Cadent, HyNet North West, accessed 22/3/19; Qq210–211; Tees Valley CA (CCU0629)

65 Trades Union Congress and Carbon Capture and Storage Association, The economic benefits of carbon capture and storage in the UK (February 2014)

66 Global CCS Institute, The Global Status of CCS 2018 (2018)

68 Centre for Energy Policy, University of Strathclyde (CCU0036); The National Oceanography Centre (CCU0020); Tees Valley CA (CCU0629)

69 Centre for Energy Policy, University of Strathclyde (CCU0036); The National Oceanography Centre (CCU0020); Global CCS Institute (CCU0025)

70 Centre for Energy Policy, University of Strathclyde (CCU0036); Tees Valley CA (CCU0629)

71 Tees Valley CA (CCU0629); Bellona Foundation, New Dutch government puts CO2 capture and storage at forefront in climate plan, accessed 5 March 2019; Global CCS Institute, “CORE2 Facilities Database”, access 5 March 2019; Equinor, “Carbon Storage”, accessed 5 March 2019

72 Annex; Tees Valley CA (CCU0629)

74 National Grid, Gas System Operator (CCU0500); Mineral Products Association (CCU0360); Pale Blue Dot Energy (CCU0029); NP11 (CCU0637); Tees Valley CA (CCU0629), Q1; Q10; Annex

75 Chemical Industries Association (CCU0505); NP11 (CCU0637); Qq215–216

77 Progressive Energy Ltd (CCU0529); Cadent Gas (CCU0569); Centre for Energy Policy, University of Strathclyde (CCU0036); Professor Jonathan Gibbins (CCU0614); Pale Blue Dot Energy (CCU0029); Decarbonised Gas Alliance (CCU0498); Mineral Products Association (CCU0360)Q225 [Pete Whitton] Q235 [Mark Lewis, Pete Whitton]

78 Centre for Energy Policy, University of Strathclyde (CCU0036); Dr Niall Mac Dowell (CCU0480); Scottish Carbon Capture & Storage (CCU0499)Cadent (CCU0642); Anglo American Platinum (CCU0070); The Geological Society (CCU0492); Decarbonised Gas Alliance (CCU0498); Mineral Products Association (CCU0360); Energy Networks Association (CCU0575); Tees Valley CA (CCU0629); Q216

80 Q235 [Mark Lewis, Jonathan Briggs]

82 National Infrastructure Commission (CCU0625)

Published: 25 April 2019