Select Committee statement from the BEIS committee on Carbon Capture Usage and Storage - Apr 25

It is a true privilege for me to make this statement on behalf of the Committee. I do so in the absence of its Chair, my hon. Friend the Member for Leeds West (Rachel Reeves). I am grateful to the Backbench Business Committee for providing the time for us to introduce our report on carbon capture usage and storage, which we published this morning, and I pay tribute to all my colleagues on the Committee, who have worked extremely hard. It is great to see some of them in the Chamber this afternoon. I also pay tribute to our brilliant Clerks, who do an enormous amount of work and without whom we could not produce anything at all.

 

The climate change protest that we have seen this week, and the words of Greta Thunberg in this place, show that there are hugely important national, local and international political decisions to be made on climate change. How we can drastically cut carbon emissions and achieve clean growth is an issue that we must devote huge energy to answering. Experts agree that carbon capture usage and storage—CCUS—will be necessary to meet the UK’s existing climate change targets at the lowest cost: without it, the costs of meeting our targets will double. Scientists also agree that it would not be credible for the UK to adopt a more ambitious net zero target—a question on which the Committee on Climate Change will provide its advice next week—if we fail to deploy CCUS at scale.

 

As our report explains, the UK is very lucky to have one of the most favourable environments in the globe for this technology. However, CCUS has suffered from turbulent policy support for 15 years. Most significantly, two major competitions to demonstrate the technology—worth £1 billion—have been cancelled, one in 2011 and one in 2016, after hundreds of millions of pounds of investment by both industry and Government. That the technology works is not in question. There are 18 large- scale operational facilities worldwide, but no commercial-scale CCUS plants have yet been built in the UK.

 

The Government’s clean growth strategy sets a new ambition to

 

“have the option to deploy CCUS at scale during the 2030s, subject to costs coming down sufficiently.”

 

The Committee welcomes that intention, but we are concerned that it does not demonstrate a sufficiently strong commitment and limits our climate change ambitions, the future for our heavy industries and the potential for investment in CCUS. CCUS is already the cheapest option—in some cases the only option—for decarbonising many of our energy-intensive industries. Our witnesses were optimistic about the potential for cost reductions but told us that these will come through deploying the technology, not by waiting for further research and development.

 

The Minister for Energy and Clean Growth—I pay tribute to her for her support—has explained that she has no target for CCUS for developers to meet in order to access funding, and that needs to be rectified. We recommend that the Government prioritise the development of clear ambitions that will bolster their renewed efforts to kick-start CCUS. Rather than seeking unspecified cost reductions, they should set out plans to ensure that projects are brought forward at least cost. It is also not clear what scale of deployment the Government are targeting for the 2030s, so we have recommended that they provide ambition and clarity to investors by adopting specific targets to store 10 million tonnes of carbon dioxide by 2030, and 20 million tonnes by 2035, in line with the advice of the Committee on Climate Change.

 

The UK has a unique opportunity to lead global development of a new CCUS industry, thanks to our expansive geological storage resource and our world-class oil and gas supply chains. However, despite that favourable position, CCUS remains a relatively immature technology. We argue that this should be seen as a benefit, as it strengthens the potential for UK leadership, and we recommend that the Government prioritise CCUS in order to benefit from growing international demand for low-carbon products and services. We risk losing our early mover advantage if the UK’s slow progress on CCUS continues.

 

CCUS can impose significant costs on industrial processes, but a failure to develop it could force many heavy industries to close in the coming decades. Witnesses were frustrated that policy decisions have historically focused on the costs of the technology, rather than the benefits. The creation of a CCUS network on the east coast alone could create 225,000 jobs and boost the economy by over £160 billion by 2050. But the benefits of CCUS appear to be poorly understood across Government Departments, not least by the Treasury.

 

The Government have set a target to commission the first CCUS facility by the mid-2020s, but we heard that might be too slow to ensure that at-scale deployment can be achieved by the 2030s. A more ambitious target, with the development of CCUS clusters in multiple regions across the country, would strengthen the Government’s strategy for developing prosperous communities across the UK. Our report recommends that the Government raise their ambition and aim to develop initial CCUS projects in at least three clusters by 2025, minimising the risk of further delays and ensuring that productivity benefits accrue across the country.

 

My own region of Teesside has an ambition to become one of Europe’s first clean industrial zones using CCS. The Teesside Collective in my constituency, a consortium of local industries, stands ready and waiting to start decarbonising UK industry. Teesside is home to nearly 60% of the UK’s major energy users in the process and chemicals sectors. To keep these industries thriving and competitive in a low-carbon world, we need to get serious about cleaning up their emissions. In 2016 our industrial emissions fell massively, but that was largely due to the closure of our steelworks. It goes without saying that we cannot meet our emission targets that way; it is immoral.

 

The internationally renowned North East of England Process Industry Cluster represents chemical-based industries across the region, but they are particularly concentrated in Teesside. The sector generates £26 billion in annual sales and £12 billion in exports, and it is the north-east’s largest industrial sector. The chemicals sector is up against strong international competition, and NEPIC estimates that the use of CCS could create and safeguard almost 250,000 jobs by 2060. Last year the Oil and Gas Climate Initiative announced a strategic partnership with six major oil and gas companies to construct the world’s first ever gas-powered energy plant on Teesside. The clean gas proposals, when delivered, would deploy full-chain CCUS.

 

Another proposal, the H21 report, commissioned by two of the UK’s gas distributors, Northern Gas Networks and Cadent, sets out a solution to decarbonise heat in the north of England by replacing natural gas with hydrogen. The proposals would also utilise CCS to make hydrogen projection zero-carbon. That is something the all-party parliamentary group on hydrogen, which I am proud to chair, is working hard to champion. As more than half of the UK’s hydrogen is produced in Teesside, the area’s potential to capitalise on CCUS is again evident.

 

It is clear that the private sector is invested in the huge potential for carbon capture and storage. However, when we met Teesside Collective representatives during our evidence-gathering session, they were frustrated that the Treasury did not seem yet to have fully bought into the idea. Leadership and funding from the public sector and the Government will be crucial for getting this technology off the ground. The Government’s attempts to develop CCUS have previously centred on funding competitions. Although we welcome the Government’s renewed promise of funding support, we are concerned that yet another competition may not be best suited to the needs of the sector.

 

During the Committee’s visit to Teesside, we heard strong opposition to the idea of a third competition, because it creates tension between competition and collaboration. The UK’s CCUS community has had a strong culture of collaboration to date, but that is being undermined by the competition structure. They pitched projects against one another and expressly limited knowledge sharing, which in turn slowed technological progress, research and development, and cost reduction. The Government should urgently consult on better approaches to allocating funding for CCUS industry clusters, and to promoting collaboration across the UK, including in those clusters that might take longer to get going.

 

CCUS presents huge opportunities for the UK economy, and it is a vital technology if we are going to meet our climate change targets. I congratulate the Minister for Energy and Clean Growth on her championing of this technology. However, the Government’s targets for CCUS remain far too ambiguous to ensure investment. It is also concerning that not all of Whitehall seems to see the advantages of CCUS. The Treasury has been singled out to us over and again for its lack of awareness of the benefits. It is imperative that any future decisions on how and when to fund this technology are taken with a full and thorough understanding of the critical role it is expected to play, not only in decarbonisation across the whole economy, but in extending the life of and modernising UK industry, such as that in Teesside.

 

Finally, in respond to the Committee’s report, the Department for Business, Energy and Industrial Strategy has said:

 

“We are pleased that the Committee shares our belief that CCUS can play an important role in meeting our climate targets.”

 

I am afraid that is disappointing, because it completely glosses over the profound differences between the Government’s approach and that of the Committee. The Government are saying that CCUS can be part of the solution, subject to costs coming down sufficiently, to a figure that they are not yet prepared to specify. We are saying that CCUS must be part of delivering our climate change targets at the lowest cost. Having decided to go ahead with CCUS, the question now is how to keep the costs down. For the sake of jobs and the economy in areas such as Teesside, and for the future of our planet and our climate targets, we need no more words, just action.

I congratulate the hon. Member for Redcar (Anna Turley) on her statement. I too am a member of the Business, Energy and Industrial Strategy Committee, and I take some pride in the report. I think it offers an exciting opportunity for the United Kingdom in what will be an ever-expanding global market for this technology. My question is based on a summary statement in the report:

 

“The greatest barriers to the development of CCUS in the UK are commercial, rather than technical.”

 

I think that is true. There is a massive opportunity for Scotland in this technology, which is why I am surprised that not a single member of the SNP’s parliamentary party has turned up for the statement—

Order. The idea is to have fairly brief questions and answers, because we have a lot of business to get through this afternoon.

Thank you, Mr Deputy Speaker.

 

My question is really quite simple. There is a commercial barrier and it relates to the business model. Requiring a single business to finance the capture, transport and storage of carbon will greatly increase the cost of carbon dioxide stored, so what can the Government do to enable the development of viable business models for CCUS?

I pay tribute to the hon. Gentleman for his commitment to and support for this. He is absolutely right that there are important steps that the Government could take to support this, which the Committee discussed in detail. The report starts to set those out. In particular, we look at the development of viable business models. He will remember that our witnesses agreed that CCUS costs could be substantially lowered by separating the business model for carbon capture in industrial facilities from that of the transport and storage infrastructure. That could create much less risk in part of the process, because those two activities have very different cost and risk profiles. The Government should put more effort into establishing that, because it is very important. Although transport and storage infrastructure is expensive, a single facility could receive carbon from multiple sites, and it is estimated that the costs of transport and storage per tonne could be reduced by as much as 90% if infrastructure costs are shared across multiple capture points. Infrastructure is critical, and that is where the Government could play a huge role.

When the Committee put forward its requirement for investment in substantial capacity, what did it think the cost of that increased capacity would be, and who should pay the bill?

I appreciate the right hon. Gentleman’s point. I understand that, after losing those two projects, any Government will have to carry out a cost-benefit analysis, and expenditure was one of the issues that was raised. We know that CCUS projects today are already much cheaper than those involved in the previous competitions. At that point, the cost was between £1 billion and £2.5 billion, but the cost of the projects coming through today is well under £500 million. That is a result of the learning that we have done in that time. I believe that CCUS will play an essential part in meeting our climate change targets. All the evidence, particularly that of the Committee on Climate Change, shows that if we do not deploy CCUS, the cost of meeting our targets will double. The Energy Technologies Institute estimates that the cost would rise from 1% of GDP to 2% of GDP, so the question is not whether we can afford to do this but whether we can afford not to.

I should like to follow the question from my right hon. Friend the Member for Wokingham (John Redwood). The House will understand what the hon. Member for Redcar (Anna Turley) has been saying, which is summarised in paragraph 32 of the report and in paragraph 10 on page 28 of the conclusions. It is important to realise that if we had judged town gas when it was first generated in Marsham Street, we would never have had a national network of pipelines and the resulting benefits for most consumers. May I also remind the House, through the hon. Lady, that it has been stated, rather inaccurately, that politicians have got away with not doing anything to fight the climate crisis and the ecological crisis for too long. That is wrong, as the Committee has shown. This is also illustrated by the fact that more than half our electricity has been generated totally by non-carbon-generating systems in the past few weeks.

The hon. Gentleman is absolutely right to say that huge steps have been made, but it is clear that we are in a climate emergency and that every step we can take will have an impact. We have a huge opportunity here for the UK to lead the way globally on a vital technology that can really help us to establish our climate credentials, meet the targets to which we are committed and create huge amounts of investment, jobs and opportunities in new green industries and technologies in areas such as mine. I am delighted to support this.