Carbon capture will play a key net zero role - Tomas Karger

Last month, the UK Chancellor Jeremy Hunt presented his eagerly anticipated first Budget to the nation. Alongside the government’s plans for tax and spending policy, the Office for Budget Responsibility (OBR) published updated economic and fiscal forecasts for the next five years including detailed plans around carbon capture and underground storage (CCUS) – a topic close to the hearts of energy experts in Scotland.

The Scottish Government has made a commitment to ensuring Scottish interests are voiced and considered, and is already working closely with the UK Government as members of their UK CCUS Cost Reduction Taskforce. It also attends the UK’s Ministerial-led CCUS Council which is tasked with taking forward the deployment of CCUS in the UK.

But back to the recent budget announcement, which focused on the four Es – Education, Enterprise, Employment, and Everywhere. The announcement confirmed that up to £20 billion will be allocated to support the early development of carbon capture storage and usage (CCUS). Disappointingly, at least to those in the North East of Scotland, the region's Acorn capture carbon project was not mentioned despite being slated for completion as soon as 2024, in contrast to similar projects in England which were highlighted. While more information was provided in the raft of climate and energy documents released on 30 March 2023, the Acorn project remains part of the Track 2 process with further delays possible as additional expressions of interest are possible up until 28 April 2023.

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CCUS is the process of separating carbon dioxide from industrial sources, for example, burning fossil fuels, for storage and/or use. The technology may be a key enabler for countries exploring how to meet their net zero targets, including the UK's 2050 target. As fossil fuels are a necessary part of the energy mix, at least until renewable sources can be ramped up, the carbon output of these conventional energy sources can be captured and stored to reduce (and potentially eliminate) the environmental impact. Adopting CCUS could assist in meeting the commitment to limit the global mean temperature increase to 1.5 degrees Celsius.

Tomas Karger is a Patent Attorney at Marks & Clerk​​​​​​​Tomas Karger is a Patent Attorney at Marks & Clerk​​​​​​​
Tomas Karger is a Patent Attorney at Marks & Clerk​​​​​​​

CCUS is not new. The first carbon capture plant was proposed in 1938 and CCUS projects have been running since the 1970s around the world. However, significant scaling up is needed to offset current CO2 emission levels. The government's stated financial commitment could accelerate the growth of CCUS in the UK and allow it to become a world leader in a potentially huge international market.

The UK has a wealth of experience in the oil and gas sector, and it is from this sector innovative solutions could be developed to scale CCUS given the overlapping knowledge base between the two industries. However, the current implementation of the Energy Profits Levy ("windfall tax") may negatively impact innovation. While the tax includes an investment allowance, this allowance is not stopping oil and gas majors from moving investments from the UK to more favourable markets thereby reducing private R&D spending in CCUS. Rethinking the EPL so that it incentivises innovation in targeted sectors such as CCUS could ensure private R&D is available to match public spending. In addition to the £20 billion announced, the government must act quickly to establish the 12 investment zones also announced in the budget. Again, the potential tax savings of such zones may prevent lucrative private investments from going elsewhere.

As mentioned later in March – on a day dubbed Green Day by some, and the Energy Security Day by others – the UK government went on to publish more than 2,800 pages of documents outlining plans to improve energy security, green the finance system and make its net-zero strategy lawful. At the same time, a consultation on business models for hydrogen production and industrial carbon capture business models was also released. This says that both hydrogen and CCUS play a “key role” in the net-zero strategy. The consultation sets out a number of proposals on issues, including the publication of information about contracts and projects as well as the eligibility terms of hydrogen and carbon capture projects. The consultation closes on 10 May this year and we look forward to seeing what this could mean for CCUS in Scotland.

Tomas Karger is a Patent Attorney at Marks & Clerk