Welcome certainty for important CCUS sector

Increased funding for carbon capture and storage projects in the UK announced in the annual Spending Review 2025 provides much-needed certainty for the market.

The UK Government has said it will provide funding for the Acorn project in Scotland, the Viking project in Humberside and the expansion of two previously funded Carbon Capture, Usage and Storage (CCUS) clusters across the UK.

The £9.4 billion of funding follows a previous commitment to invest up to £21.7bn over 25 years to support the implementation of the two “track 1” CCUS clusters in the UK. This first tranche of funding was allocated between HyNet in North West England and the East Coast Cluster in Teesside.

The government must seize the chance to help create a Europe-wide carbon dioxide storage market, says Stacey Collins

The government designated the Acorn and Viking projects as “track 2” CCUS clusters, but further funding was required to enable these projects to go forward and be deployed in line with the UK’s target to reduce its greenhouse gas emissions to net zero by 2050.

The Acorn project – a joint venture being developed by Storegga, Shell UK, Harbour Energy and North Sea Midstream Partners – is expected to store at least 5 million tonnes of carbon dioxide per year by 2030 and create more than 10,800 direct and indirect jobs as construction activity takes place. A further 4,700 long-term jobs will be required to maintain the project’s operations.

In March, business leaders and organisations including the Confederation of British Industry and the Scottish Chambers of Commerce signed a letter urging Chancellor Rachel Reeves to back the Acorn project, arguing it was a vital opportunity for Scottish industry to decarbonise.

The CCUS sector went into the spending review with a degree of nervousness and despite the strong progress that has been made in recent months, there were concerns about whether the Labour government would stand by the prior government’s commitment to develop at least four CCUS clusters. In that context, it is great news to see £9.4bn in capital budgets committed to support the expansion of the two track 1 clusters.

However, the announcement spelled mixed news for the track 2 clusters as there’s limited detail on what the development funding will look like, and the future of track 2 will be decided at a later date. In some respects, it’s an unconvincing message to the potential track 2 projects, although it sounds a bit like the government is challenging track 2 to make its case in the coming months.

The focus on CCUS impact in terms of jobs, energy security and clean power in the Spending Review shows how it fits well with the government’s wider priorities, and CCUS remains a sector where the UK can still be a leader and reap the benefits accordingly. Those would not just be in terms of the direct advantages which would arise from a domestic CCUS sector – significant though those are – but also in terms of the UK’s ability to export skills and technology, and to import carbon dioxide for storage.

Following the Spending Review, the government must not miss the opportunity to forge ahead with its commitment to helping create a Europe-wide carbon dioxide storage market. As well as clarity on what the announcement means for progress on UK projects, we also need to see continued progress on linking the UK and EU emission trading schemes and removing regulatory barriers which will allow a European storage market to come forward.

Stacey Collins is a Partner, Pinsent Masons