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Driving Cost Reductions and Value for Money in CCUS

This report identifies the key levers to deliver cost reductions while scaling up the CCUS sector. This will ensure value for money, whilst delivering economic growth for the UK, achieving net zero and an affordable and secure energy system.

These levers include accelerating learnings from first mover projects, delivering economies of scale and maximising the use of infrastructure, growing UK supply chains and promoting industry collaboration.

The Government has already taken significant steps to establish the first two CCUS clusters. This momentum needs to be maintained to deliver the next set of projects so that a critical mass is realised to achieve these future cost reductions.

The most immediate step is to enable CCUS projects to move forward that have already been selected and have invested millions of pounds, at their own risk, in the UK’s industrial heartlands. To do this, Government must commit funding to deliver Track-1, Track-2 and Track-1 Expansion projects, alongside other CCUS projects that deliver on the same timescales.

The report outlines three further key recommendations for the Government to act upon that will enable cost reductions to be realised by industry. These include:

  • Refine the approach to future funding allocation: Learning from Track-1, the next phase of CCUS funding must improve the risk-sharing between parties and optimise the full value chain; from supply chain – CO2 capture project – transporting the CO2 – permanent CO2 storage, without any delay to the allocation process. The Government must also commit to regular future allocation rounds, as we saw in offshore wind, to signal the scale and timing of future opportunities to investors, industry and the supply chain, which will drive down costs.
  • Accelerating delivery of comprehensive carbon markets both in the UK and internationally: The UK must efficiently implement its planned expansion of the UK Emissions Trading Scheme (ETS), introduce a UK Carbon Border Adjustment Mechanism (CBAM), and develop cross-border CO2 transport and storage markets. Strong support should also be given to protect sectors from carbon leakage, especially those not covered by the proposed UK CBAM.
  • Leveraging public finance through GB Energy and National Wealth Fund: Targeted public finance mechanisms should be used to de-risk first-of-a-kind projects, ensuring sustainable funding that attracts further private investment in the medium to longer term.

Acting now on these recommendations will establish an industry that provides energy and low carbon product security as well as delivering substantial economic growth. The CCUS industry is projected to create 50,000 skilled jobs, unlock £94 bn of cumulative GVA in the UK and CO₂ storage exports generate potential revenues of £30 billion per year – all by 2050.

Download the report.