U.K. Carbon Capture May Have Cost $11 Billion, Watchdog Says

A U.K. competition to spur carbon capture and storage technology that was scrapped in 2015 was on track to cost taxpayers about 8.9 billion pounds ($11 billion), the National Audit Office said Friday.

The Department of Energy and Climate Change said in 2012 that its CCS program would require 2 billion pounds to 6 billion pounds in capital and operational costs over 15 years to test technology that takes emissions that cause global warming and sequester them underground. 

By 2015, when the Treasury held a spending review, DECC’s projected costs had grown to 8.9 billion pounds from 3.9 billion pounds, based on estimates of long-term subsidy payments, according to the NAO report, the first time the total estimated cost of the program has been publicly disclosed. The two departments had never agreed on a spending limit for the project, the NAO said.

“Not being clear with HM Treasury about what the budget is from the start would hamper any project, and caused particular problems in this case where the upfront costs are likely to be high,” said Amyas Morse, head of the NAO, in an e-mailed statement. “The Department must learn lessons from this experience if it is to stand any chance of ensuring the first CCS plants are built in the near future.”

The Treasury’s decision to scrap 1 billion pounds in funding in November 2015 was a blow to companies including SSE Plc, Royal Dutch Shell Plc and Alstom SA, which were hoping to win support for projects that demonstrate the technology.

The government is now seeking a new way to build the technology, which is seen as key to the U.K. meeting its climate change goals. CCS is one of three technologies alongside nuclear and renewables that may help the U.K. meet its 2050 target for reducing emissions by at least 80 percent from 1990 levels, according to National Grid Plc, which manages the nation’s electricity distribution network.

“We haven’t closed the door to carbon capture and storage technology in the U.K., but decisions had to be taken to control government spending and protect consumer bills,” a spokesman for the Department for Business, Energy & Industrial Strategy, which now includes DECC, said in an e-mailed response to the NAO report.

“The government will have to work hard to restore investor confidence in carbon capture and storage, or come up with cost-effective alternatives to meet the U.K.’s decarbonization target,” Meg Hillier, chairwoman of Parliament’s Committee of Public Accounts, said in a statement accompanying the report.

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