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Britain’s withdrawal on Wednesday of £1 billion support for carbon capture and storage (CCS) may end prospects for the technology this decade in Europe.
CCS is a barely tested tool which may allow the world to wean itself off fossil fuels more gradually, and so cut the cost of a low-carbon transition. It works by capturing the carbon emissions from burning coal or gas, or producing steel and cement, and storing these in underground aquifers or disused oil wells.
Britain launched in 2012 a competition for £1 billion capital funding to fit CCS technology to a coal or gas-fired power plant, or both, and so demonstrate a commercial-scale project which would store CO2 under the North Sea. The process had whittled down two bidders, in Scotland and northeast England, with the winner to be announced within weeks.
What does Wednesday’s u-turn tell us?
1. Chancellor George Osborne is calling the shots in UK energy policy.
Britain’s CCS withdrawal was a result of the UK Treasury swinging an axe to spending at the Department for Energy and Climate Change (DECC), which has also forced it to abandon support for onshore wind and solar power. Meanwhile, Osborne recently courted Chinese investment, to build Britain’s first new nuclear power plant in 20 years, announced last month, and has supported tax credits and streamlined permitting for onshore gas.
2. Energy policy should be for the long term
If there was ever a long-term project falling victim to political short-term goals, this could be it. DECC Secretary Amber Rudd repeated her support for CCS last week. So the decision to pull support was made in the last few days, as Osborne hunted funds to pay for tax credits for low-paid workers. CCS was a soft target. The vast majority of people don’t understand what it is.
But there are risks in such haste. Testing CCS requires system infrastructure which needs support well beyond a single government. Scrapping the auction has wasted up to £100 million in taxpayer support for the auction process. And it may be inconsistent with the country’s Climate Act, which committed governments to stick to five-year “carbon budgets”, towards a binding goal of cutting carbon emissions by at least 80% by 2050. It leaves unanswered questions about future CCS support, if any, and impacts on investor confidence.
3. Governments are not fully convinced about tackling climate change.
Governments are happily fund low-carbon projects, but usually only for other benefits. It seems that Osborne likes nuclear power because it allows him to claim economic alliance with China. Germany likes solar power because it isn’t Russian gas. Denmark likes wind power because it has created a global industrial wind turbine champion, in Vestas.
CCS has no other purpose than to cut carbon emissions from burning coal and gas, making fossil fuel power vastly more expensive in the process. It requires upfront investment, and unlike the incremental investment in wind farms and solar, this is massive investment on a system scale, to trap, transport and store CO2. However, CCS may allow deeper carbon cuts at a lower cost, according to analysis by the International Energy Agency and others, by tackling emissions from fossil fuel power generation and heavy industry.
A global failure to fund CCS technology suggests that governments still do not view tackling climate change as a major benefit in its own right. They may not be truly convinced about climate change, or they may be waiting for others to step up, in a free-rider dilemma. CCS can be an industrial policy, too, but only in a world where beating climate change is considered an urgent threat.
4. CCS delivery is still possible, with long-term funds
Perhaps on the bright side, there are policymakers who operate outside an electoral cycle. The specialist news service Mlex reports that the European Commission may now co-fund one of the apparently doomed UK CCS projects. Then Britain would only have to support the operation of the plant. That would mean the technology survives, to prove it’s worth.