Cancelling a £1 billion competition to develop technology to capture and store carbon emissions could push up the costs of meeting climate targets, Whitehall’s spending watchdog has warned.
The Treasury made the decision last year to ditch the competition for “carbon capture and storage” (CCS) technology, which would capture the emissions from fossil fuel power stations or heavy industry and store them permanently underground.
The move will delay deployment of CCS, an initially costly technology which is expected to fall in price after the first projects are up and running, until after 2030 and could make long-term carbon cuts more expensive, the National Audit Office said.
Without the technology a more expensive mix of low carbon technologies will be needed to cut the UK’s greenhouse gas emissions by 2050 in line with legally-binding targets to tackle climate change.
A report by the National Audit Office revealed that the Department of Energy and Climate Change (Decc) warned the Treasury before the decision that meeting the targets by 2050 without CCS would cost an extra £30 billion.
But neither the Treasury or Decc, which had spent £100 million on the competition before it was cancelled, estimated the cost of delaying the roll-out of the technology.
Up to two projects would have benefited from £1 billion funding and an estimated £570 million over 15 years in contracts for the energy they generated, paid for through consumer bills.
But they would have brought down the costs of CCS by 23% and delivered an estimated £4.3 billion in benefits to society, according to the NAO’s briefing for the parliamentary Environmental
Audit Committee (EAC).
The surprise announcement to cancel the competition, buried on the day of the spending review, means CCS will not meaningfully contribute to cutting emissions before 2030.
The UK is currently set to miss its targets for the 2020s by around 10%, Government assessment shows.
There is also “no viable way to achieve deep emissions reductions from the industrial sector in the near future”, which means industry will have to buy permits to cover their pollution, exposing businesses to fluctuating carbon prices, the NAO said.
The cancellation also increases the risk that investors will be deterred from dealing with the Government in the future, or will demand higher returns to do so.
The risk is further increased by the timing of the announcement at a late stage in the competition.
In response to the report, EAC committee chairwoman Mary Creagh said: “The last minute cancellation of support for carbon capture and storage may have delayed the roll-out of this crucial technology for a decade or more.
“CCS is essential to meet our 2050 climate change targets.
“It is critical that the Government establish a new strategy for supporting large scale deployment of CCS, as without it, the eventual bill for cutting our carbon emissions could be up to £30 billion more.”
