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UK Government proposes £20 charge to fund carbon capture and storage technology

Written by
ClimeFi Insights
Published on
17 December 2024
UK Government proposes £20 charge to fund carbon capture and storage technology

The UK government outlines a £21.7 billion investment strategy for carbon capture technology, aiming for a decarbonised energy grid by 2030, which may lead to an annual increase of £20 in energy bills.

Britain's government is proposing a new financial framework to support carbon capture and storage technology, which may result in an additional charge of approximately £20 annually for energy bills. This initiative aims to enable the decarbonisation of the energy grid by 2030 and involves a significant investment of £21.7 billion over the next 25 years for various projects aimed at reducing emissions from gas-fired power stations and industrial factories.

The plan was detailed by Jeremy Pocklington, the permanent secretary at the Department for Energy Security and Net Zero (DESNZ), during a recent session of the Public Accounts Committee. Pocklington revealed that roughly three-quarters of the estimated costs associated with these carbon capture projects would be funded through energy bills, placing an annual financial responsibility of around £520 on both domestic and non-domestic users, equal to just over £20 a year. However, the burden will be uneven, with commercial users likely facing higher charges.

"The other quarter of costs would probably be borne from central government funds," stated Pocklington, assuring that officials remain “very conscious about the costs” to consumers. The funding model indicates that levies will not be invoiced until 2029, which is when the carbon capture projects are anticipated to be operational.

Pocklington emphasised the importance of carbon capture within a comprehensive set of policies designed to meet carbon budgets and tackle climate change effectively. He argued, "Our assessment is that carbon capture, as part of a wider suite of policies, is the most appropriate and the best-value way to meet our carbon budgets and tackle climate change." He specifically pointed out the challenges faced in industries such as cement production, which emits significant greenhouse gases due to chemical processes, asserting that alternative technologies have yet to prove effective in capturing such emissions reliably.

Among the key initiatives outlined in the government’s strategy is the Net Zero Teesside project, which will capture emissions from a new gas-fired power station, subsequently liquefying and storing them beneath the North Sea. A spokesperson from DESNZ highlighted the findings of the National Energy Systems Operator’s independent report, which indicates that clean energy technologies, including carbon capture and storage (CCUS), play a pivotal role in achieving the 2030 decarbonisation mission. The spokesman asserted that adopting CCUS could lead to a more secure energy system, potentially resulting in lower electricity costs and bills.

“Without carbon capture, British industry will be unable to make the transition to a clean energy future,” commented the DESNZ spokesperson, reinforcing the critical nature of these projects. Initially, the launch of carbon capture initiatives will be supported by central government funding, thereby having no immediate impact on consumer bills. However, as Pocklington elaborated, post-2029 funding will involve a combination of levy and Exchequer support, contingent on meeting specific construction and performance benchmarks once the projects are operational.

Source: Noah Wire Services