Budget 2025: Backing CCUS to Power Britain’s Clean Industrial Future

The UK’s Carbon Capture, Utilisation and Storage (CCUS) industry has reached a critical juncture. Years of planning and persistence are now paying off: five Final Investment Decisions (FIDs) have been secured, allowing the first major projects to break ground and start construction. CCUS is no longer an ambition – it’s becoming the cornerstone of Britain’s clean industrial future.

With the Autumn Budget fast approaching, the CCSA has put forward non-fiscal recommendations to the Treasury aimed at accelerating progress towards a thrilling, self-sustaining CCUS sector that decarbonises industries and delivers low carbon power.

The Chancellor has recently set out her ambition “to invest in our infrastructure and our industry to build a stronger economy.” That message is important for CCUS deployment. The UK faces a challenging economic landscape, shaped by sluggish global growth, inflationary pressures and tight fiscal conditions. However, CCUS can unlock growth and deliver lasting economic strength – building resilience, productivity and prosperity for the decades ahead.

Why CCUS matters now

That is why the Government must build on the progress made in the recent Spending Review. CCUS is an economic lifeline and will unlock billions in private investment, revitalise industrial regions, and secure jobs across the country – from pipeline welders in the North West to offshore engineers in Aberdeen and scientists pioneering new carbon utilisation technologies.

Delivering the first four industrial clusters will add £8 billion in GVA annually by 2030, rising to £94 billion by 2050, with more than 80% of the supply chain deliverable by UK firms. The emerging CO₂ storage industry alone could be worth £30 billion a year by mid-century, creating a major new export market for British expertise.

But this is also about what we stand to lose if we don’t act. Without CCUS, millions more tonnes of CO₂ will continue to enter our atmosphere every year – warming our planet, worsening air quality, and eroding the natural environment we depend on. The cost of inaction is far higher than the cost of investment. Failing to decarbonise essential industries like cement, chemicals and refining not only puts jobs at risk, but weakens their long-term competitiveness – and in doing so, jeopardises our health, our climate and the prosperity of future generations.

CCUS, alongside Greenhouse Gas Removals (GGRs) has rightly been recognised by the Government as a ‘frontier industry’ in its Industrial Strategy. From enabling the production of low carbon cement for the homes of the future, to sustaining the energy expertise developed in the North Sea and supporting a just transition for workers and communities, CCUS offers a chance to reimagine British industry – not as a legacy of the past, but as a global leader in clean technology.

CCUS priorities for the Autumn Budget

The Autumn Budget presents an opportunity to accelerate progress towards creating a thriving, self-sustaining CCUS sector that decarbonises industries and delivers low-carbon power. With the UK now delivering the first projects across our industrial heartlands, millions of tonnes of CO₂ will soon be captured and stored, ensuring that our vital foundational industries remain active and competitive.

The UK can cement its position as a global CCUS leader by taking forward three actions that signal long-term commitment and can strengthen investor confidence:

1. Maintain momentum on current projects
Following the Government commitment made at the Spending Review, we now need to see this development funding deployed swiftly to Viking CCS and the Acorn Project, the next two industrial clusters, to keep them on track to reach financial close within this parliament. This will complement the progress already underway on the East Coast Cluster and HyNet, enabling further capture projects to advance for connection to these clusters in construction.

2. Provide a clear route to market for new projects
Provide a clear route to market and an allocation framework for the next CCUS projects required to meet decarbonisation goals and sustain critical foundational industries. In doing so this must also accelerate the development of market frameworks for CO₂ transport by ship, road and rail to complement the pipeline projects that are already underway.

3. Create markets for low-carbon products and removals
Implement enabling policies and regulations to stimulate markets for low-carbon products, carbon removals, and European-wide CO₂ storage. This will create supportive revenue markets for CCUS projects that will enable the transition to a self-sustaining sector.

Taken together, these steps will ensure that the UK maximises the economic opportunity CCUS offers and shifts the industry towards a merchant model, not reliant on government subsidise – an industrial ecosystem ready for the 2030s and beyond.

Building a clean future

The story of Britain’s industrial heartlands – Teesside, the Humber, the North West, South Wales, Derbyshire & Staffordshire, and Scotland – is the story of modern Britain itself. These regions powered the Industrial Revolution, built the nation’s prosperity, and shaped our identity as a world-leading manufacturing power.

Despite decades of industrial decline, that story is not over. CCUS offers a way to honour that legacy while building a modern, clean-energy economy rooted in those same communities.

New projects are bringing investment, apprenticeships, and pride back to these regions. The expertise developed in the North Sea – in geology, offshore engineering, and large-scale project delivery – can be redeployed to store carbon safely beneath the seabed. The same skills that have maintained Britain’s energy security will now also underpin its decarbonisation.

This is more than climate policy – it’s industrial renewal. When people can build skilled, well-paid careers where they grew up, producing the low-carbon materials that will build our homes, hospitals and infrastructure, the transition to net zero becomes tangible, local and proudly British.

We now need to maintain momentum on CCUS deployment to build a stronger economy. The Chancellor has a huge opportunity at this Budget to do exactly that with the actions set out above – many of which come at minimal cost to the Exchequer, but with maximum benefit for Britain’s industry, environment and long-term prosperity. (more…)

Context

Earlier this year, the Carbon Capture and Storage Association (CCSA) responded to the UK Government’s consultation on ”Building the North Sea’s energy future”. This consultation was run by the North Sea Transition Authority (the NSTA), the regulator for North Sea oil and gas, offshore hydrogen, and carbon storage industries. The consultation focused on ensuring a managed, prosperous, and secure energy transition – one that enables the UK to deliver on its ambition to become a global clean energy superpower.

The UK’s ability to lead this global shift hinges on unlocking the full potential of the North Sea. With world-class geology across the UK Continental Shelf (UKCS) and a workforce renowned for offshore expertise, the CCSA emphasised that Carbon Capture, Utilisation and Storage (CCUS) must sit at the heart of the North Sea transition – reducing emissions, supporting skilled employment and strengthening the UK’s international leadership in clean energy.

Why Does It Matter?

CCUS is critical to the UK’s energy transition and the North Sea presents a unique opportunity for its deployment, critical for meeting net zero targets while also generating economic growth. With an estimated 78 gigatonnes of Carbon Dioxide (CO₂) storage capacity, the UK holds over a third of Europe’s entire storage potential. This makes the North Sea one of the most valuable assets for industrial decarbonisation in both the UK and wider Europe.

The CCSA’s response stressed the need to keep CCUS at the centre of planning for the North Sea’s future – not just for essential emission reductions, but to grow UK supply chain capabilities and skilled workforces to secure a leading position in the global carbon capture market.

From vision to action

The CCSA welcomes DESNZ’s focus on building new clean energy industries and leveraging the North Sea’s established expertise. However, it argues that stronger and clearer policy direction will be needed to turn ambition into action.

To fully realise the UK’s CCUS potential, the Government must think about providing signals and support to projects and clusters across the country that could handle European volumes of CO₂, while accelerating work on non-pipeline transport and cross-border trade. A joined-up approach will be essential to ensure that the UK’s CCUS industry can operate efficiently, affordably, and at scale.

Investment in the North Sea’s clean energy future must also go hand in hand with investment in its people and supply chains. The transition offers a natural pathway for the oil and gas industry to redeploy its capabilities, with 80% of the Carbon Capture and Storage (CCS) value chain targetable by the O&G supply chain. With the right policies, the growth of UK CCUS exports could add £4.3 billion to Gross Value Added by 2050.

But this opportunity depends on timing. Declining North Sea activity makes it imperative for the Government to act decisively to align supply chain readiness with project deployment. Without this coordination, there is a real risk of losing skills, capacity, and competitive advantage, particularly among small and medium-sized enterprises.

The CCSA has therefore called for measures that provide investors with confidence and continuity: a clear CCUS project pipeline, support for early movers, and targeted efforts to protect existing industrial capabilities. It also emphasises the need to address workforce challenges – including skill shortages, an ageing workforce, and limited access to training – through long-term, strategic planning. With the right support, the UK can develop a skilled, future-ready workforce capable of delivering CCUS at scale and speed.

Balancing energy transition and regulation

As the UK reforms it’s licencing of the North Sea, the CCSA urges a balanced approach that reduces emissions without increasing the UK’s dependence on imported, high-carbon fuels. The transition must avoid unintended consequences that could slow CCUS deployment or undermine broader net zero objectives.

The CCSA’s members have emphasised the importance of clear, transparent regulation and the need to recognise that CCUS and other clean energy sectors are fundamentally distinct from oil and gas extraction. For the North Sea’s transition to succeed, the NSTA’s objectives must reflect this difference – and the regulatory framework must be consistent, well-resourced, and closely aligned with wider Government policy.

Turning commitment into delivery

The next step is for the UK Government to translate consultation feedback into a detailed plan for the North Sea’s future. The CCSA reaffirms that CCUS must be central to that strategy.

Clear communication and transparent timelines are critical to building investor confidence. The Government’s £21.7 billion CCUS funding commitment represents a major milestone, but funding alone is not enough. It must be accompanied by enabling policies that strengthen the supply chain, develop the workforce, and remove barriers to market growth.

One such barrier is the need for cross-border CO₂ transport. This could be unlocked through a UK–EU agreement under the Trade and Cooperation Agreement, and through reforms to the UK and EU Emissions Trading Schemes. Encouragingly, the UK and EU are working together toward linking these systems – a step that could accelerate international collaboration on decarbonisation.

The Government also has a key role to play in clarifying how existing oil and gas infrastructure can be repurposed to support net zero goals. Repurposing pipelines, wells, and offshore facilities offers a cost-effective way to build CCUS capacity while sustaining local economies and protecting energy communities in transition.

A collaborative future for the North Sea

The CCSA welcomes continued engagement with DESNZ and stands ready to support the refinement of policy that will bring the North Sea’s clean energy future to life.

The region that once powered the UK’s industrial growth now stands at the centre of its low-carbon transformation. By harnessing its geological advantages, engineering expertise, and collaborative spirit, the North Sea can once again define the UK’s industrial identity – this time as a hub for CCUS, clean innovation, and sustainable growth.

With coordinated action, clear policy, and a shared vision, the North Sea can become not just a chapter in the UK’s energy history, but a cornerstone of its decarbonised future.

Consultation: Welsh Government’s Hydrogen Policy consultation

Department: Welsh Government

Consultation Period: February – May 2025

Region: Wales

Context

As we await the Welsh Government response, and ahead of the Welsh Senedd returning from summer recess, this blog looks at the CCSA responce to the Hydrogen policy consultation. The consultation followed the Welsh Government’s consultation on CCUS – a previous CCSA blog post for the CCUS consultation can be found here.

The Welsh Government outlined its commitment to support hydrogen developments that contribute meaningfully to net zero targets and a just transition. Its position emphasised that hydrogen will be supported where it delivers a demonstrable and sustainable contribution to decarbonisation, strengthens the green economy, and avoids locking in fossil fuel dependency. This approach is guided by the following key principles:

• Technology neutrality – No favoured technologies, processes, production methods or hydrogen applications.
• Focus on outcomes – Emphasis on the emissions intensity of the hydrogen and its contribution to prosperity throughout a development’s life cycle, rather than approving specific production methods.
• Compliance with standards – Hydrogen production must comply with the UK Low Carbon Hydrogen (LCH) Standard.
• Pragmatic transition – A phase of using Carbon Capture and Storage (CCS) enabled – also known as ‘blue’ – hydrogen produced by fossil fuels may be needed.
• Climate alignment – All new developments must mitigate the causes of climate change in accordance with the energy hierarchy for planning in Planning Policy Wales (PPW).

Why does it matter?

Wales is well-placed to support blue hydrogen and wider Carbon Capture, Utilisation and Storage (CCUS) deployment, with three industrial clusters fully or partially based in the region: HyNet North West, the South Wales Industrial Cluster (SWIC), and 7CO₂. Blue hydrogen projects could connect into these clusters.

South Wales – where the 7CO₂ and SWIC clusters are located – offers significant potential for new blue hydrogen production. There is also capability for blue hydrogen production in North East Wales – where the HyNet North West cluster is located. Additionally, there is scope to retrofit existing grey hydrogen facilities in South Wales for blue hydrogen production. Proactive interventions are therefore needed from the Welsh Government to realise these opportunities.

CCSA position

• The CCSA welcomes the Welsh Government’s recognition of hydrogen’s role in decarbonisation and economic growth – particularly its acknowledgement that a “phase of blue hydrogen produced by fossil fuels with CCS may be necessary”.

Deploying blue hydrogen at pace and scale would reinforce the Welsh Government’s commitment to a technology-neutral hydrogen strategy, ensuring no specific technologies are favoured. The CCSA echo the Climate Change Committee’s (CCC’s) advice in the Welsh Fourth Carbon Budget advice that low-carbon fuels, CCS, and engineered removals are required to meet Welsh 2040 and 2050 carbon budget and net zero targets.

• Despite general support, the CCSA is concerned about the consultation’s language, which discourages blue hydrogen. This concern was also raised in response to the Welsh Government’s CCUS consultation. Given the absence of large-scale green hydrogen production and the prevalence of grey hydrogen production in Wales, deterring blue hydrogen investment may skew the market towards ‘purely renewable’ technologies and inhibit decarbonisation efforts.

Blue hydrogen projects can act as early enablers of the LCH sector due to their comparatively lower costs than green hydrogen, meaning that Wales can quickly secure climate benefits from hydrogen production. Hydrogen UK research indicates that blue hydrogen production at gigawatt (GW) scale will become operational sooner than comparable electrolytic production projects, enabling the decarbonisation of hard-to-abate sectors and baseload volumes of hydrogen from an earlier date.

Additionally, the consultation places heavy evidentiary burdens on developers to prove that hydrogen projects support long-term decarbonisation and economic growth, a burden not placed on other infrastructure projects – potentially delaying sector progress.

• The way Planning Policy Wales (PPW) and the Energy Hierarchy for Planning accounts for blue hydrogen projects is concerning. Hydrogen is broadly underrepresented in PPW, and the current energy hierarchy is insufficient to guide planning officials on hydrogen development in Wales – particularly for blue hydrogen, due to the lower emphasis on “Minimise carbon impact of other energy generation” target in the energy hierarchy.

The hierarchy’s system-wide approach also poses challenges, as individual developers often lack visibility over the full value chain, making it difficult to determine how the hierarchy applies to specific projects.

• Unclear integration with existing frameworks – The CCSA’s response highlighted that elements of the Welsh Government’s policy duplicates existing planning and permitting processes. Avoiding this is key to accelerating blue hydrogen project deployment.

Once finalised, the Welsh Government’s policy should be integrated within existing policy and regulatory frameworks, providing clear requirements to developers. The CCSA calls for alignment with the UK Government, CCC, and National Energy System Operator (NESO) policies for streamlined deployment.

• Ensuring demand integration in hydrogen policy – The Welsh Government’s policy position shows limited consideration of offtake customers. Establishing a broader market framework for LCH is essential to support a fully connected hydrogen network and deliver the just transition.
• Wider considerations for the Welsh Government – To enable a functioning LCH economy, the Welsh Government should consider additional supporting measures:
• Streamlining permitting and planning processes
• Collaborating with the UK Government to develop the blue hydrogen sector in Wales
• Engaging with the NESO and other infrastructure stakeholders to develop transport and storage infrastructure and generate ecosystem synergies

Collaborative efforts are particularly crucial to mobilise the full LCH value chain simultaneously. Research has shown that in 2030, blue hydrogen production in the UK will be associated with ~4,000 jobs directly and generate £1.2 billion of direct and indirect Gross Value Added (GVA) annually. Without coordinated development across the value chain, progress in the blue hydrogen sector could slow, which could mean that Wales may not fully capture some of these economic benefits.

• Delivering projects that Support Welsh Values – Blue hydrogen production aligns with Welsh priorities, such as the Well-being of Future Generations Act (2015) and the Welsh Government’s ambition to support a just-transition for Welsh all communities and industries. Therefore, the Welsh Government should focus on delivering projects that can provide benefits for Welsh culture and language.

Moving forward and next steps

Following consultation, the Welsh Government will finalise and integrate the hydrogen policy into future updates of Planning Policy Wales, Net Zero Wales Carbon Budgets, environmental permitting, and energy licensing – providing clarity to developers, regulators, and the public on the Welsh Government’s hydrogen objectives.

With CCUS clusters and supporting infrastructure already advancing in Wales, now is a pivotal moment. Clear policy guidance from the Welsh Government is needed to create demand certainty and retain investor confidence. However, it is essential that this is complemented by UK Government actions, for instance through providing clarity on future allocation rounds.

The CCSA is committed to advancing CCUS and LCH across the UK and welcomes continued collaboration with the Welsh Government and wider stakeholders to accelerate deployment in Wales. The CCSA encourages stakeholders to share views on how to ensure the Welsh hydrogen policy supports coordinated infrastructure delivery and investment readiness.

Consultation: Invest 2035: the UK’s Modern Industrial Strategy

Department: Department for Business and Trade (DBT)

Consultation Period: October – November 2024

Region: UK

Context

Late last year, the CCSA submitted a response to the DBT consultation: ‘Invest 2035: the UK’s Modern Industrial Strategy’. The UK Government’s proposed 10-year Industrial Strategy aims to provide stability for businesses to drive long-term economic growth, with a focus on innovation, entrepreneurship and taking advantage of the UK’s strengths in existing and emerging sectors.

Why does it Matter?

The UK needs an updated Industrial Strategy to support high-growth sectors critical to the Government’s growth mission. Many of these industries—particularly the foundation sectors—will depend on technologies such as Carbon Capture, Utilisation and Storage (CCUS) and hydrogen to realise their full potential and achieve decarbonisation. Embracing these innovations can help secure jobs, prevent deindustrialisation and position the UK as an attractive destination for new investment.

CCSA Position

• Clean Growth and Decarbonisation Opportunities – low-carbon technologies have the potential to decarbonise UK industries while developing energy security, creating high-quality jobs, attracting investment and exporting low-carbon expertise around the globe. Decarbonising industries in the UK is essential to removing them as a roadblock to reaching the nation’s net zero target by 2050. A major force behind this shift to net zero is the growth of CCUS clusters and Carbon Dioxide (CO₂) Transport and Storage (T&S) networks which can operate on regional, national and even international scales.

Key sectors essential to achieving decarbonisation and driving economic growth include cement and lime, refining and fuels, chemicals, iron and steel, and Energy from Waste (EfW), as well as emerging low-carbon product markets. In the UK, foundation industries—such as metals, ceramics, glass, chemicals, paper and cement—account for 50 million tonnes of CO₂ emissions annually, representing 10% of the UK’s total emissions from homes and businesses.

A successful modern Industrial Strategy needs to address how these industries will decarbonise to meet net zero and climate goals. Support will be crucial for both established industries and new sectors to cut emissions while unlocking their growth potential.

• Positioning the UK as a Global Leader – the UK benefits from its unique geological storage capacity, which equates to almost one third of all of Europe’s storage potential. This competitive advantage alongside growing CCUS networks – including allowing cross-border CO₂ transport – could bring significant economic benefits. Providing storage services to other European countries could generate UK tax receipts while also lowering CO₂ storage costs for UK emitters by achieving economies of scale.

To unlock this potential, key challenges need to be tackled. These include:

• Enabling non-pipeline CO₂ transport within the UK to offer flexible CO₂ transport for cluster projects and international CO₂
• Linkage of the UK and EU Emissions Trading Schemes (ETS) to create a level playing field for UK businesses that are competing in international markets. It was recently announced that the UK Government and the EU plan to work together towards linking the two ETS schemes, and the CCSA would welcome further updates on what this approach entails, along with indicative timescales.
• Recognising permanent CO₂ storage across borders and allowing cross-border CO₂ transfers are vital for maximising the benefits of CCUS and driving UK industrial and economic growth.

• Establishing an Economic Framework for Industrial Decarbonisation – an effective economic and market framework is crucial for driving industrial decarbonisation. A key priority is setting a stable and reliable UK ETS carbon price to encourage investment in CCUS, negative emission technologies, and other decarbonisation efforts. Linkage between the UK and EU ETS will be key to ensuring a stable carbon price across international markets.

Alongside a stable, predictable carbon price, applying a robust Carbon Border Adjustment Mechanism (CBAM) will guarantee that importers will face equivalent carbon costs to UK manufacturers. This will protect export competitiveness and create a level playing field which minimises the risk of carbon leakage. Both UK and EU CBAMs must also factor in CO₂ imports and exports to meet decarbonisation targets effectively.

The low-carbon product market, in particular, could see huge benefits from a strong economic framework. A reliable UK ETS and a strong CBAM – alongside the introduction of mandatory product standards, and the use of public procurement – could work together to boost growth in this market.

• Supporting Markets for Low-Carbon Products – the UK has the potential to take the lead in developing markets for low-carbon products like green cement, low-carbon steel, and other sustainable materials. Government support is key to unlocking this potential, especially through funding CO₂ utilisation projects, public procurement strategies and incentives for low-carbon products. These steps will help the UK tap into emerging markets while supporting its shift to a cleaner economy.

• The Importance of Government Clarity – to create a nationwide Industrial Strategy that drives economic growth and meets decarbonisation targets, the Government must provide clear, deliverable, and long-lasting policies. Predictable policies build investor confidence and help businesses make long-term investment decisions. The importance of this is even greater for first-of-a-kind (FOAK), capital-intensive, and infrastructure-heavy projects like CCUS.

The Government must also address delays in permitting and planning processes, which often delay project development. Given the nascent nature of the CCUS sector, the complexities involved in many of the proposed projects in terms of regulatory approval, and the FOAK nature of the projects, approvals of this nature have not been done before and the regulators will likely experience unforeseen difficulties in accurately assessing CCUS project applications.

Additionally, offering clear commitments on future allocation rounds and funding will provide the predictability needed to drive investment and innovation in these key industrial sectors. Assurances made by the Government improve investor confidence, which provides the certainty needed for the long-term planning of CCUS projects.

• Regional and Localised Industrial Strategies – a regional, place-based approach is important to harness the unique strengths and growth opportunities of different areas across the UK. The Industrial Strategy should take a regional approach, focusing on high-growth areas like industrial clusters while also helping dispersed sites to decarbonise.

A key priority for this approach is helping supply chains decarbonise industrial sectors – which can be achieved by addressing funding gaps, both nationally and regionally, for skills development and implementing target policies to align regional supply and demand. By building a well-prepared workforce and strong supply chains, the UK can accelerate its industrial transition while strengthening economic resilience at both local and national levels. However, a skills challenge persists within the CCUS sector, which includes a lack of workforce mobility, skills bottlenecks and barriers to new entrants joining the workforce. These issues need to be tackled collaboratively by both Government and industry.

Moving Forward and Next Steps

The UK’s Modern Industrial Strategy must drive growth and decarbonisation by supporting foundation industries, advancing CCUS, ensuring energy security and fostering investment and innovation for a low-carbon future.

The CCSA emphasises that CCUS must be a central component of any industrial strategy, particularly those focused on industrial decarbonisation. But a well-rounded Industrial Strategy needs to be supported by additional measures – for instance, advancing Track-2, Track-1 Expansion and other projects that can deploy along similar timeframes, and a Government commitment to deploying wider enabling market frameworks. This will accelerate the rollout of decarbonisation technologies.

Clarksons’ CO₂ Gases team hosted a Member Discussion Forum in partnership with the CCSA, focused on ‘CO₂ Vessel Supply and the Global Shipbuilding Picture’. The event included a presentation from Stephen Gordon (Managing Director, Clarksons Research), followed by a panel discussion, moderated by Olivia Powis (UK Director, CCSA) and featuring:

• Bruce Moore – Director Strategy and New Energy, Mitsui O.S.K. Lines, Ltd (MOL) (Europe Africa)
• Tommy Baggio – Consultant, CO₂ & Green Ammonia, Clarksons
• Matt Neale – Director, Newbuilding and Sale & Purchase, Gases, Clarksons
• Stephen Gordon – Managing Director, Clarksons Research

The panel explored the full shipbuilding mix – from design to delivery – and covered a range of topics, such as the benefits of synchronising Carbon Capture and Storage (CCS) project timelines with shipbuilding and chartering, and the need to protect key stakeholders in shipping projects via thorough due diligence, clear processes and intelligent decision making.

Several themes emerged during the session, reflecting topics and trends that are being more widely observed across Clarksons. These included:

1.   Why CCS needs shipping

Shipping is critical for CCS projects which do not have nearby access to CO₂ storage facilities, allowing CO₂ to be transported to storage sites and enabling the widespread deployment of CCS technology. Not only is shipping important for individual project success, it also helps meet global decarbonisation goals. Speaking at the Member Discussion Forum, Oliva Powis said:

“We estimate over 90 projects are looking to potentially deploy carbon capture to enable us to reach net zero and the targets for capturing and storing 50 to 60 million tonnes by 2035. Shipping will be absolutely critical to getting a lot of those projects underway.”

2.   Shipbuilding’s challenges

While the CCS industry is rapidly expanding (we’ve seen a 100% increase in projects globally over the past year), the shipbuilding sector faces constraints, including a reduction in global shipbuilding capacity. Panellist Stephen Gordon said:

“We think shipbuilding capacity is about 35-40% lower today than it was in 2010. We believe there will be some incremental increases in shipbuilding capacity, but we may only get halfway back to where we were previously, by the end of the decade. At the moment, shipbuilding capacity is very tight.”

There are also other challenges such as high demand (due to an ageing world fleet), high costs (pricing has gone up 40% in the last four years), and long lead times for building new vessels (these have increased to three to four years), Combined, these are impacting how long it will take and how much it will cost to roll out CO₂ shipping. As Matt Neale put it:

“The shipbuilding business is extremely firm at the moment. Whereas before, the buyers had all the power, that has now completely gone. The power is very much in the hands of the shipyards, and I don’t think anyone would debate that.”

This mismatch between demand and the pace of supply could create bottlenecks and delays in getting the necessary shipping infrastructure in place to support CCS projects.

3.   Collaboration is essential

Collaboration, coordination, and information sharing between the CCS and shipping industries is crucial. Aligning project timelines, streamlining commercial models, exploring innovative financing models, and developing technical standardisation specifications will be key to unlocking the full potential of CO₂ transportation in the CCS value chain. If we are going to scale up global CCS capabilities, maintaining cross-industry open dialogue and finding creative solutions will be essential. As Bruce Moore said during the panel discussion:

“We need to find a way to actually commercially structure it to incentivize everybody to take their place in the supply chain.”

Involving the full value chain (shippers, technology providers, CCS experts etc.) will also help to develop much-needed industry codes and standards. This will make it easier for the shipping technical authorities to understand what is being loaded, what is being discharged, its composition, the required temperatures etc., and help establish a liquified CO₂ spec.

Challenges and opportunities

When it comes to CO₂ vessel supply and the global shipbuilding picture, how can we overcome challenges and capitalise on opportunities?

Challenge: CO₂ vessel supply and CCS projects are both dynamic spaces

Opportunities and solutions: Market players must constantly adapt and respond to new technology and fast-paced regulatory change around decarbonisation. While speaking on the event panel, Matt Neale highlighted there is still a lot of uncertainty in CO₂ newbuilding, saying:

“Even the shipyards themselves don’t yet know exactly what the market is going to ultimately demand. We’ve seen a lot of discussion around different vessel sizes, different propulsions, and whether to go for low or medium pressure. There are a lot of decisions still to be made.”

Given this, engaging shipping experts to validate projects, understand the scale of the undertaking, and provide guidance on project development and contracting processes can be hugely beneficial. Having been involved in liquefied gases since the early 1960s, here at Clarksons we consider ourselves well placed to advise clients operating in this space. Speaking during the Member Discussion Forum, Tommy Baggio encouraged CCS projects to:

“Speak to the experts when it comes to shipping. Clarksons has extensive experience in running competitive processes and has contracted over 100 gas carriers in the last ten years. We have the information and the know-how which a successful shipping strategy will need to draw on.”

Tommy also highlighted the strength of the ship owning community, pointing out that:

“This industry is blessed with a group of shipowners who are really innovative and actively looking to find solutions to complex problems. These are great guys to work with.”

Challenge: Finding creative solutions to shipbuilding challenges

Opportunities and solutions: To overcome limited shipbuilding capacity, we recommend broadening the industry’s understanding of timescales and the stages of CCS projects so that shipping timeline requirements can be integrated into CCS project planning as early as possible. Similarly, the CCSA’s continued work to reduce costs across the CCS value chain, including contracting strategies, will help tackle high costs.

Challenge: How to capitalise on the huge potential for UK-based CO₂ storage

Opportunities and solutions: The UK coastline is home to ⅓ of Europe’s potential CO₂ storage, representing a significant opportunity for importing CO₂ storage from EU emitters. But the UK must move quickly to capitalise on this, which may require governments to provide targeted support to kickstart this emerging market and ensure the UK’s participation.

Challenge: Identifying any viable alternatives to Asia in order to meet global shipbuilding requirements

Opportunities and solutions: Speaking during the Member Discussion Forum, Elwin Taylor pointed to the remaining installed shipbuilding capacity in Europe and government objectives to sustain a level of shipbuilding activity for strategic reasons. Whether this could translate into competitive pricing of CO₂ carriers is questionable, and a level of subsidy would almost certainly be required. Additionally, Stephen Gordon suggested that local content requirements could be met by gas plant and equipment suppliers, as these are fields in which European designers and manufacturers maintain a strong position.

For more information you can speak to Clarksons’ CO₂ Gases team.

It’s hard to believe it’s almost 3 months since COP28 and our first Markets and Mandates roundtable in Dubai.  As governments started the new year with fresh vigour, keen to push ahead with carbon management strategies, the CCSA held a further Markets and Mandates workshop, co-organised with Carbon Balance Initiative, Oxford Net Zero and DESNZ in February.

The Markets and Mandates project aims to help bridge the gap between theory and practice in CO₂ storage development, in response to a request from the CCUS Council for further policy development on carbon storage mandates. While it has a specific focus on the UK, the implications of the project are expected to have global significance as countries consider policy measures to drive progress in their Nationally Determined Contributions (NDCs).

Representatives from NGOs, academics, government, advisors, and the CCUS industry participated in the workshop, each bringing unique perspectives. What became evident was the diversity of opinions on markets, mandates, and CCS, sparking engaging and insightful discussions. The workshop provided an opportunity to delve into the intricacies of a CO₂ storage mandate and assess potential policy scenarios’ efficacy.

Despite enthusiastic participation, not all questions could be addressed due to time constraints. However, the workshop served its purpose by raising more questions than answers, highlighting areas for further investigation and economic modelling.

One key takeaway for me was the lack of confidence among attendees in existing market measures to drive sufficient CCS deployment. Many discussed the potential inclusion of carbon removals or negative emissions in the UK Emissions Trading System (ETS) as a possible approach. However, concerns were raised regarding the timing of reforms and the system’s reliance on political will when it comes to delivering against forecast price trajectories.

Discussions extended to the potential impacts of a Carbon Takeback Obligation (CTBO) and the need to align policies across markets. Meanwhile the journey towards effective CO₂ storage development is ongoing and we have to find a way to scale it up – and rapidly.

We may not have found all the answers, but I think the discussion has paved the way for further exploration and collaboration in this area. Stay tuned for the release of the final report in May and DESNZ’s progress thereafter!

If you are interested in reviewing the Markets and Mandates report, or in getting involved in the wider cost reduction work in response to the CCUS Vision, please contact the CCSA’s Research and Projects Manager, Rebecca Bell.