CCS costs in UK could reach £408bn by 2050: report
Consumers ending up shouldering most of the costs of installing and operating CCS in the UK, a new report has found.
The costs of installing and operating carbon capture and storage (CCS) in the UK could reach a staggering £408 billion between now and 2050, as the technology remains commercially risky and technologically unproven, according to a new study by the Institute for Energy Economics and Financial Analysis (IEEFA) released on Wednesday.
In detail, an average of £5 billion will be needed annually by 2030, rising to £19 billion per year between 2031 and 2050, to reach carbon capture targets.
The UK government has already earmarked more than £50 billion in subsidies to support CCS projects, accounting for just 8% of the country’s 2050 CCS target.
These include £30 billion under the Dispatchable Power Agreement Business Model, which supports gas-powered generation and CCS, £13 billion allocated to the HyNet and East Coast Cluster projects under the CCUS Transport & Storage scheme and £16 billion for two further schemes, the Industrial and the Waste Carbon Capture Business Models.
The figures represent a hypothetical maximum in a high-cost scenario, according to the government, however they are very likely to be reached due to the high costs of the CCS technology, according to the IEEFA report, which analysed the 7th Carbon Budget proposal by the UK Climate Change Committee (CCC).
Most applications targeted for CCS in the UK are far from technologically proven at scale, meaning there’s a high risk that projects will fail to capture the targeted emission volumes, the study said.
The CCC is an independent body advising the UK government on climate policy.
In its 7th Carbon Budget, released in February, the CCC reduced the country’s 2050 annual carbon capture and storage (CCS) target by 30% to 73 million tonnes of carbon dioxide (MtCO2). CCS nonetheless remains, in the proposal, a core pillar of the UK’s net-zero pathway and is expected to contribute 73 MtCO2 per year, which equates to 17% of the UK’s 2023 emissions, by 2050.
The 2030 goal meanwhile was lowered by 41% to 13 MtCO2, and the 2040 target was down by 36% to 51 MtCO2.
Engineered removals — including bioenergy with CCS (BECCS) and direct air CCS (DACCS) – are expected to account for 45% of the UK’s CCS target by 2050, despite having the highest costs and lowest level of maturity, and despite the CCC recommending that carbon capture should be focused on hard to abate sectors such as chemicals, cement and lime manufacture.
As the highest-cost sector, engineered removals requires the largest investment of £179 billion across DACCS and BECCS by 2050, accounting for 44% of the capital allocation.
The second biggest sector for CCS deployment is power generation, accounting for 16 MtCO2. According to the CCC, the average abatement cost per tonne of CO2 captured and stored across the sectors ranges from -£145 for electricity supply to £349 for BECCS over the period 2025-2050.
CCS subsidies
CCS subsidies and support are mostly provided under Contracts for Difference and Renewables Obligation schemes, known as environmental levies, which are funded by consumers through electricity bills.
About 75% of the costs of CCS will be passed onto customers through such schemes, the report noted citing data from the Public Accounts Committee (PAC).
That’s partly on the back of UK ETS prices, which are too low to incentives emitters to invest in decarbonisation solutions.
UK ETS revenues are expected to fall from £6 billion in the 2023-24 financial year to £1.8 billion by 2029-30, totalling £21 billion of lost revenue over the next six years based on 2023-24 prices.
The government has until June 2026 to finalise the carbon budget, with environmental groups now asking for CCS funding to be scrapped.
CCS use should be “pulled back, especially that which is subsidy backed, in preference of other lower carbon energy such as renewable power and storage,” the report’s author, Andrew Reid told Gas Outlook.
An open letter sent by a group of climate scientists and organisations to the UK government last year warned that CCS would lock in fossil fuel generation for decades to come and result in further emissions arising from methane leaks and from the transportation and processing of LNG of U.S. origin.
“The CCC made it clear that CCS is a ‘necessity, not an option’ for the UK,” Mirte Boot, co-founder and UK director at NGO Carbon Balance Initiative told Gas Outlook.
“We have to massively reduce fossil fuel use, but storing carbon will be essential to achieve net-zero targets.”
“However, this should be funded through a polluters pays system rather than through taxes and government subsidies.”
On the back of that, the NGO is calling for the introduction of a carbon storage obligation for fossil fuel companies, which complements the emissions trading system.
(Writing by Beatrice Bedeschi; editing by Sophie Davies)