UK pledges £22bn in funding for carbon capture and storage projects

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The UK government has announced up to £21.7bn of support to get the country’s first carbon capture and storage projects up and running, in a big moment for the nascent industry but one which highlights the costs involved.

Ministers said the funding, over 25 years, would support two undersea carbon storage sites and pipelines, with the capacity to store over 8.5mn tons of carbon dioxide per year combined, as well as carbon capture at three planned projects to produce hydrogen, power and energy-from-waste. The projects are in Teesside and Merseyside, northern England.

The UK emitted 384.2mn tonnes of carbon dioxide equivalent in 2023, according to provisional government figures.

Nonetheless, the move marked the first step towards getting the industry off the ground in the UK and an attempt to inject confidence about the government’s seriousness about the sector.

However, the three industrial sites receiving support to attach carbon capture technology to their projects fall short of the eight which entered negotiations with the government last year. The prospects of support are now unclear for the remainder.

The government also did not give any specifics about support for the next batch of capture and storage projects chosen by the previous government to be next in line for support, in Scotland and the Humber region.

A Labour party aide said it remained committed to the industry in “Humberside, Scotland and elsewhere around the country,” adding, “this is our first step, and we will set out our future plans in due course.”

The government said its support, of up to £21.7bn, to be funded by a mixture of levies on energy bills and Treasury funding, should attract about £8bn of private investment into the projects.

The government is keen to highlight its ability to secure private financial backing for the UK ahead of its international investment summit on October 14.

Prime Minister Sir Keir Starmer said the government was “reigniting our industrial heartlands” and the support will “give industry the certainty it needs”.

CCS involves trapping carbon dioxide as it is produced, compressing it and pumping it underground, sometimes into depleted oil and gas reservoirs, to avoid it being released into the atmosphere.

The technology is seen as key to the UK’s legally binding goal of cutting carbon emissions to net zero by 2050, but questions linger about its commercial and technical feasibility at scale.

Carbon capture capacity globally reached about 51mn tonnes last year, according to BloombergNEF, or 0.14 per cent of global emissions, including projects in the US, Canada and Norway. 

Previous government attempts to support the industry, in 2011 and 2015, were dropped at the last minute.

In 2023, Jeremy Hunt, then Tory chancellor, committed £20bn of investment in CCS projects over two decades. But none of that funding was made available before this year’s general election. 

The planned carbon storage sites to secure support are Italian oil giant Eni’s project in Liverpool Bay, in the north-west, and the Northern Endurance Partnership off the coast of Teesside, in the north-east, being developed by BP, Equinor and TotalEnergies.

One of the planned power projects to win support is BP and Equinor’s planned Net Zero Teesside gas-fired power station. Lord Ben Houchen, Tees Valley mayor, said work should start by the end of this year, creating 4,000 construction jobs.

The Protos energy-from-waste plant being developed by Encyclis and Biffa in Cheshire; and a hydrogen production plant being developed by Essar at its oil refinery in Stanlow, are the other two industrial sites which have secured support to capture their emissions.

Some scientists and environmentalists believe industry is using CCS to prolong the life of fossil fuel assets. However, groups including the Climate Change Committee, which advises the government, believe it is necessary for the UK to meet climate targets.