Budget promises £800m for CCS but ‘fails to close climate policy gap’

The government has pledged the construction of at least one gas-fired carbon capture and storage (CCS) power station by 2030 and announced a new grant scheme for low-carbon heating.

But, in his first Budget, presented today, new chancellor of the exchequer Rishi Sunak has disappointed environmentalists by freezing the carbon price.

The Budget confirms the Conservative manifesto commitment to establish two CCS cluster in at least two UK sites by 2030, supported by a new CCS Infrastructure Fund, which will be worth at least £800 million.

The budget for the new fund will be finalised in the comprehensive spending review when it is published later this year.

In addition, the government has announced that it will use bill-payer subsidies to support the construction of the UK’s first privately-financed gas CCS power station by 2030.

The Budget document also announced an extension of the domestic Renewable Heat Incentive (RHI), which was due to close at the end of the current financial year, until 31 March 2022.

To replace the RHI, the government will consult on introducing a new grant scheme from April 2022 to support the installation of heat pumps and biomass boilers by households and small businesses, backed by £100 million of new Exchequer funding.

This will be accompanied by a new biomethane support scheme to increase the proportion of green gas in the grid funded by a Green Gas Levy.

Funding worth £96 million was also confirmed for the final year of the Heat Networks Investment Project. When this winds up in 2022, the government will invest a further £270 million in a new Green Heat Networks Scheme.

The government also announced in the Budget that the carbon price support (CPS) rate will be frozen at £18t/CO2e in 2021/22.

The Finance Bill will include legislation to prepare for both a UK Emissions Trading System (ETS), which could be linked to the EU ETS, and alternative arrangements for a new tax on emissions if the EU and UK are unable to reach an arrangement on carbon pricing as part of a new trade deal.

The Climate Change Levy, which applies to businesses, will be raised on gas in 2022-23 and 2023-24, whilst the rate on electricity will be frozen.

The Budget announces an extension until 2022-23 of the Plug-in Car Grant, which will provide £403 million worth of subsidies next year for purchases of new electric vehicles.

In addition, £129.5 million of plug-in grants will be made available for vans, taxis and motorcycles to 2022 23 and zero emission cars have been exempted from the Vehicle Excise Duty (VED) expensive car supplement.

The Office for Low Emission Vehicles will conduct a “comprehensive” review of EV charging infrastructure to ensure the effective targeting of £500 million over the next five years to support the rollout of a fast-charging network. The review will cover the full strategic road network and other strategic locations in cities and rural areas.

Reaction

The Solar Trade Association branded the Budget as “thin on measures to tackle climate change and support the transition to a low-carbon economy”

Chief executive Chris Hewett said: “Renewables are vital to reaching net zero, and without good policies in place to support the uptake of solar we will fall well short of the 40 gigawatts needed by 2030 to keep on track. Time is running out to act.

“The freeze on the carbon price support rate is particularly disappointing, as is the lack of any meaningful policy on energy efficiency and green improvements for existing homes, such as solar and battery storage.”

Sir John Armitt, chair of the National Infrastructure Commission, welcomed the “level of ambition” in the Budget but said the now further delayed National Infrastructure Strategy was necessary to see “the whole recipe”.

He added: “We are particularly encouraged by today’s announcements on five-year funding settlements for city leaders to invest in local transport improvements, and by the additional investment in electric vehicle charging points, both of which are in line with our National Infrastructure Assessment recommendations.”

Drax Group, unsurprisingly backed the government’s commitment to CCS, with chief executive Will Gardiner saying it demonstrated the government’s “commitment to communities and businesses in the North”.

He added: “By accelerating the development of vital negative emissions technologies like bioenergy with carbon capture and storage (BECCS), which is being pioneered by Drax, we can permanently remove millions of tonnes of CO2 each year from the atmosphere.”

The policy was also welcomed by the Committee on Climate Change.

Its chief executive Chris Stark said that while today’s announcements didn’t “close the climate policy gap” this was understandable given the focus on addressing coronavirus.

He said: “We welcome funding for increased electric vehicle roll-out and low-carbon heating. The tree-planting package is also positive – and will complement similar steps in Scotland and Wales to increase the size of UK woodland. It’s especially pleasing to see the Treasury remedy its position on supporting carbon capture and storage, which will put the UK in a strong position to develop carbon capture over this decade.

“It’s good to see the Treasury dipping its toe into changes to the tax barriers to reducing emissions. That hints at a willingness to consider more fundamental reform later this year. But getting on track to net zero obviously requires a great deal more – and it seems we will have to wait to see promised steps on energy efficiency in buildings. These issues now move centre-stage, requiring urgent attention from the Chancellor.”