Keir Starmer, Rachel Reeves and Ed Miliband are in the north-west today to push three months’ worth of bad PR into a pipe and force it deep into the rocks beneath the Irish Sea, where it will remain for millions of years. Sorry, wrong molecule: it’s actually CO2 that they’re planning to store beneath the waters, although presumably they’re hoping a bit of negative sentiment will go with it. The government has greenlit two “carbon capture clusters” in Merseyside and Teesside that it says will help decarbonise industry while directly creating 4,000 jobs and attracting £8bn in inward investment. I’m told this is the first in a series of announcements around investment that will be made in the runup to the government’s investment summit on 14 October.
This investment comes at a very significant cost, however. The government has committed up to £21.7bn of public investment over 25 years to these two clusters. The projections for jobs and private investment are great news, but some voters may ask how the country has £21.7bn to give to the companies involved in these schemes – which include the multinational oil giants BP, Equinor, Total and Eni – when it doesn’t have, say, £2.5bn a year to dramatically reduce child poverty.
The truth is that £21.7bn isn’t being spent now and it may never be spent – the words “up to” and “over 25 years” are vital clues, as is the fact that the government hasn’t been able to say how much is being spent in this parliament. This is absolutely not, I’m told, because the government is hiding anything, but because the amount is being “scored” as part of the upcoming Budget.
Carbon capture usage and storage (CCUS) is itself a highly controversial technology, because rather than doing things differently, it just clears up the mess made by business as usual, in what critics say is a rather limited and old-fashioned manner. Last month a group of climate scientists wrote an open letter to Ed Miliband in which they warned that continued high investment in CCUS would “lock the UK into using fossil fuel based energy generation to well past 2050”. The letter warns that the current plan for investment in CCUS and “blue hydrogen” would leave the UK dependent on a fuel source that has a higher footprint than coal.
In economic terms, a report published in December by Oxford University’s Smith School of Enterprise and Environment warns that CCUS is a dangerous bet. Renewable energy sources have been getting dramatically cheaper over time. By 2030 it will be ten times cheaper to generate electricity from solar power than from gas, according to the energy analysts Rystad. But the Oxford report says that “in more than 40 years, estimates of the costs of fossil power with CCS have not declined at all” (my emphasis).
The cost of wind and solar power has been forced down by the market – lots of companies increasing their margins by generating energy as cheaply as possible – but CCUS has only one buyer: the taxpayer. It is a subsidy-collection technology, and not a cheap one. According to the Oxford study, the global cost of reaching net-zero by 2050 when using lots of CCUS increases by a trillion dollars a year.
There’s also evidence that CCUS isn’t the safest bet for workers who train in the industry. In 2022, the Institute for Energy Economics and Financial Analysis, conducted an analysis of the 13 major projects that have done most of the carbon capturing humanity has so far managed using this technology. It found that the majority had either captured much less carbon than intended, or failed entirely.
If the new carbon-capture clusters succeed, however, they will remove 8.5 million tonnes of carbon that would otherwise have gone into the atmosphere, which the government says is equivalent to taking four million cars off the road. At this point you may feel like screaming into a cushion that maybe if there were a few more trains and buses there would actually be four million fewer cars on the road. Give it a go, it might be therapeutic.
So why is the government happy to throw money at a controversial technology from which the main beneficiaries will be multinational oil firms? As Reeves writes in an op-ed promoting the policy today, “it is the jobs that matter”. This government is focused on fixing the economy above all other concerns, and it knows that the most important way in which it can do this is to fix Britain’s investment crisis. We lag behind other major economies in productivity growth because businesses haven’t been encouraged to spend as much on skills, research and equipment in the UK as they have in the US, France or Germany. Our investment performance is the lowest in the G7 and almost the lowest (28th out of 31) in the OECD.
That is the main fact for this government about today’s carbon capture investment (which is also, by the way, the greenlighting of schemes that had already been proposed under the previous government). Doubtless they would love to be announcing something cleaner and less controversial but the main point is that it cajoles businesses into spending. That is the first priority.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.