U.K. Confirms up to £22 Billion in Funding for Two Carbon Capture Clusters

The British government is committing “up to £21.7 billion” ($28.57 billion) over the next 25 years to fund two carbon capture, utilization and storage (CCUS) clusters in the northeast and northwest parts of England, a decision that could pave the way for 8.5 million tons of carbon emissions being sequestered each year.

The funding will go towards carbon capture projects in the East Coast Cluster in northeast England and the HyNet cluster in northwest England and north Wales.

The former is expected to capture emissions from the Phillips 66-operated 221,000-b/d Humber refinery and the Prax-operated 113,000-b/d Lindsey refinery, while the HyNet cluster includes a project to capture emissions from the Essar Oil-operated 200,000-b/d Stanlow oil refinery.

The government said the multi-billion pound funding would create 4,000 jobs and support up to 50,000 jobs in the long-term.

The East Coast Cluster is a collaboration between six different energy companies, including BP, Eni, Equinor, National Grid, Shell and TotalEnergies.

The HyNet cluster could reduce carbon emissions by up to 10 million tons a year, according to the HyNet Alliance, which comprises several companies including Heidelberg Materials, Cargill, Engie and Ineos, among others.

The Carbon Capture and Storage Association trade body welcomed the government’s commitment, with Olivia Powis, the CCSA’s chief executive, noting that this would help the country’s journey towards net zero.

The funding “means that we can deliver thousands of new highly skilled jobs whilst reducing our carbon dioxide emissions and retaining existing jobs in our industrial areas in critical industries like cement, chemicals and manufacturing across the UK,” Powis said in a statement Friday.

There is strong cross-party political support for CCUS in the U.K., and the investment announced by the new Labour-led British government is similar in scale to the £20 billion of support over 20 years promised by the last Conservative administration in 2023.

Developing the CCUS clusters dovetails with the new government’s emphasis on boosting economic growth and construction work across several economic sectors.

The country’s new chancellor, Rachel Reeves, wrote in the Guardian newspaper on Friday that CCUS is a “gamechanging technology” representing “a major success story for British industry” that would also result in “jobs in the supply chain, such as pipe welders, mechanical engineers, site managers and surveyors.”

Delay to CCS Projects Could Boost Carbon Prices

The British government has set a target to capture 20-30 million mt of carbon by 2030, with four clusters operational by the end of the decade. Meeting that goal would result in the capture of carbon equivalent to a quarter of the 96.8 million mt emitted last year by installations and airlines subject to the UK’s Emissions Trading System.

Capturing upwards of 30 million mt of carbon every year would consequently put a significant dent in demand for UK emissions allowances (UKA), the pollution permits which must be purchased by industrial emitters covered by the cap-and-trade ETS.

But delays in bringing CCS projects online could have expensive ramifications later in the decade and into the 2030s for those emitters, especially polluters that are unable to pass the full cost of carbon onto end-consumers. In that CCS-delayed scenario, demand for UKAs will be higher than expected, while the number of annual allowances available for purchase in the ETS will have shrunk.

British carbon prices have been in the doldrums for more than a year and on a downward slide for two years. OPIS assessed the benchmark December 2024 UK emissions allowance at £36.32 ($47.59) on Thursday, far below the record settle of £97.75 on August 19, 2022, but most analysts forecast that prices will be in triple digits by the end of the decade.

Such a price would force the country’s largest installations to spend almost half a billion pounds a year on UKAs if they do not decarbonize.

Reporting by Humberto J. Rocha, hrocha@opisnet.com
Editing by Anthony Lane, alane@opisnet.com 

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