Had the United Kingdom followed through with its £1 billion carbon capture and storage commercialization competition, the nation stood to reach its long-term climate goals £30 billion cheaper, according to an analysis issued Wednesday by the National Audit Office. The “[Department of Energy and Climate Change’s] bid for power sector CCS showed a return of £4.50 per pound invested, with most benefits arising after 2030. It estimated net social benefits of £3.7 billion to 2050. DECC calculated the benefits on the basis that without CCS it would cost an additional £30 billion to meet the 2050 carbon targets,” the report says.
The UK’s Climate Change Act calls for the nation to reduce its emissions by at least 80% from 1990 levels by 2050.
The U.K. announced during a spending review on Nov. 25, 2015, the official cancellation of its CCS Commercialization competition, effectively forcing the shutdown of the two projects remaining the running: Shell’s Peterhead and Capture Power’s White Rose.
Following the announcement, the House of Commons Environmental Audit Committee requested that the National Audit Office review how the Treasury took account of environmental issues. The DECC bid made several arguments in favor of the competition, including that the two projects would bring the cost of CCS down by 23 percent.
Regardless, the Treasury ended the competition, giving Shell and Capture Power little notice. It justified its decision on several bases: the competition aimed to deliver CCS before it was cost-efficient to do so; the costs to consumers would be high and regressive; it would not guarantee the further investment required to expand CCS deployment; and there were simply better uses for the £1 billion.
The audit office report identified several impacts of the cancellation. “Cancelling the CCS competition may affect the costs of meeting long-term carbon targets. Cancelling the CCS competition will delay the large-scale deployment of this technology: independent government advisers believe that an early programme start would reduce the cost of meeting long-term targets,” the report says
The report adds that the decision may negatively impact the industry’s view of the government: “The bidders and wider CCS sector did not expect the cancellation, which came at a late stage in the competition. The timing of the announcement could reduce investors’ confidence even further when dealing with government in the future.”
The audit office is not done with its investigation of the CCS commercialization competition. “This case study considers the process that preceded the decision to cancel the CCS competition. We will report on DECC’s management of the programme prior to the cancellation later in 2016,” the report says.
