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Osborne commits up to £1bn for carbon capture and storage

Chancellor George Osborne has said up to £1bn will be set aside for the “world’s first carbon capture and storage demonstration project” and a further £1bn pumped into a Green Investment Bank.

In announcing his long-awaited Comprehensive Spending Review he said a further £200M will be set aside for offshore wind, specifically for the development of port sites to allow the construction of turbines.

Osborne has put £1bn into a Green Investment Bank, “the first time anybody has ever been in favour of such a bank”, he said.

More funds would come from the private sector and the sale of government assets, he said. The aim was to make the UK a leader in the green economy.

Over the course of the spending review period the Department of Energy and Climate Change will cut resource spending by 18% in real terms, but increase capital spending by 41% in real terms. This is cope with an increase in nuclear decommissioning costs. The Nuclear Decommissioning Authority (NDA) have to continue to improve efficiency but capital funding will nonetheless increase over the Ssending review period.

Department of Energy and Climate Change budget

 2010-112011-122012-132013-142014-15
Resource spending1.21.51.41.31
Capital spending1.71.522.22.7
Total2.933.43.53.7

                                                      

Highlights

Up to £1bn will be invested to create one of the world’s first commercial-scale carbon capture and storage demonstration plants – strengthening the UK’s position as a world leader in cleaner fossil fuel technology. The announcement that just £1bn will be allocated to CCS, allowing only one plant to be built, coincided with news that an Eon CCS demonstration project would be pulling out of the UK and relocating to the Netherlands.

There is £860M funding for the Renewable Heat Incentive which will be introduced from 2011-12. This will drive a more-than-tenfold increase of renewable heat over the coming decade, shifting renewable heat from a fringe industry firmly into the mainstream. The Government will not be taking forward the previous administration’s plans of funding this scheme through an overly complex Renewable Heat levy.

Osborne has also set aside £200M for low-carbon technologies including offshore wind technology and manufacturing infrastructure at port sites. The east coast ports will get £60M so that they can handle big turbines.

Osborne also annoucned revenue raised from the Carbon Reduction Commitment (CRC) energy efficiency scheme will be used to “support the public finances” instead of being recycled to participants. This effectively amounts to a new tax on high energy emitters but removes the benefit for those companies that are low carbon.

Feed-In Tariffs will be “refocused” on the most cost-effective technologies, saving £40M in 2014-15. The changes will be implemented at the first scheduled review of tariffs unless higher than expected deployment requires an early review. New tariffs for solar photovoltaics are likely to be first in the line for cuts.

The Nuclear Decommissioning Authority (NDA) will “continue to improve efficiency” in order to increase investment in decommissioning the highest hazards across its estate. Capital funding for the NDA will increase over the Spending Review Period.

The Government will review the work delivered at arm’s length by bodies such as the Carbon Trust, Energy Saving Trust, the Coal Authority and the delivery arm of Ofgem.

DECC will also make savings in its programme spend, including not providing Government funding for the National Nuclear Centre of Excellence, and refocusing contributions to international institutions.

Administration costs will be reduced by 33% through increased use of shared services across Government, a refocusing on critical workstreams and further reductions to travel, accommodation and IT expenditure.

Energy secretary Chris Huhne said the coalition government remains on course to deliver on its promise to be the greenest government ever.

“We will help create green jobs and green growth – and secure the low carbon investment we need to keep the lights on,” he said.

Readers' comments (1)

  • Storing carbon dioxide appears to be inherently unsafe, with no apparent options for dealing with unforeseen failure. Why should future generations be saddled with the risks involved? Carbon dioxide is heavier than air. A sudden large failure could suffocate nearby populations.
    A safer option might be re-cycling captured carbon dioxide by using renewable energy to convert it into more easily stored methanol, which could be converted into petrol.
    A better option would be to expedite renewable energy deployment together with appropriate energy storage to reduce carbon dioxide production.
    Peter Ravine

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