Rachel Reeves handed stark warning over 'de-industrialisation' if Acorn carbon capture funding cut

Oil and gas chiefs have warned the Labour government it could usher in a strategy of deindustrialisation if Scotland’s carbon capture project has its funding cut.

Oil and gas chiefs have warned Rachel Reeves against cutting funding for Scotland’s “critical” carbon capture project, amid industrialisation fears that could put thousands of jobs at risk.

The Chancellor is reportedly reviewing funding ahead of her spending review for the Acorn carbon capture and storage project, to be based at St Fergus near Peterhead.

Chancellor Rachel Reeves Credit: Ian Forsyth/PA Wire | Ian Forsyth/PA Wire

The project would allow carbon emissions, largely from the oil and gas sector, to be captured and injected into the seabed - in theory preventing the pollution from entering the atmosphere.

Scotland’s strategy to reach net zero by 2045 cannot be achieved without carbon capture, despite concerns the technology has not yet been proven to work at commercial scale. SNP ministers watered down their 2030 legal climate targets, at least in part, due to the delays to the carbon capture project.

The Acorn project is also poised to play a crucial role in decarbonising heavy industries at Grangemouth. SNP acting net zero secretary Gillian Martin claimed a failure to prioritise the system could have contributed to Petroineos’s controversial decision to close Scotland’s only oil refinery earlier than politicians anticipated.

READ MORE: SNP warn over Labour's carbon capture and Grangemouth 'betrayal' as anger mounts

Amid a gloomy financial climate, the Commons public accounts committee has warned the UK government’s support for “unproven, first-of-a-kind technology to reach net zero is high risk”.

Reports suggest Scotland’s carbon capture hub, and another North Sea project in the Humber, both given track 2 status, could have funding cut in June’s spending review.

In October, the Labour government announced £21.7 billion of funding for carbon capture for two projects, but the Acorn project, which has previously missed out on funding, did not get prioritised.

Last month, First Minister John Swinney told The Scotsman he was “running out of patience” with false promises from Westminster over the project, amid anger no funding was allocated in the Chancellor’s recent infrastructure announcements.

READ MORE: John Swinney 'running out of patience' over key Scottish carbon capture project

Now, Offshore Energies UK (OEUK) has starkly warned that a failure to properly get the Acorn project up and running could result in Scotland’s net zero strategy relying on deindustrialisation instead of cutting emissions.

David Whitehouse, chief executive of OEUK, said: “We ask the government to hold true to its carbon capture commitments to give industry the clarity it needs to get on with the second track of these projects. This will help crowd in the private investment we need to build self-sustaining, world-leading industries right here in the UK. 

David Whitehouse, CEO of Offshore Energies UK. Picture: Michal Wachucik/Abermedia

“We welcome the UK government’s previously announced support for track 1 projects. It is critical now that in support of economic growth and industrial decarbonisation, it now announces a clear funding envelope for track 2 projects and the path for those projects that sit outside of the current track process.

“With a clear funding envelope, our CCUS [carbon capture, utilisation, and storage] sector can providing enduring value in the UK economy, supporting the decarbonisation of our hard to abate industries. Our path to net zero must be decarbonisation not deindustrialisation.”

The UK government has been approached for comment.