It’s well known that UK Chancellor George Osborne has his eye on being the next UK Prime Minister. He’s also made a big pitch for the UK to engage closely with China to secure inward investment. But with climate change a defining issue for future investment flows his decision last week to cut UK Carbon Capture and Storage (CCS) funding has massively damaged UK credibility, just when China was launching it's own CCS plan at the Paris Climate Negotiation COP21.
The backstory – the UK's 2012 CCS programme
Back in April 2012, the UK hosted the 3rd meeting of the Clean Energy Ministerial. Prime Minister David Cameron used his speech to highlight the UK’s actions on CCS as evidence of his commitment to leading the ‘greenest government ever’. He also underlined the importance of government and industry working together to deliver investment in CCS and offshore wind in the North Sea.
Domestically, the UK had just launched its Commercialisation Programme, aimed at selecting and funding commercial scale CCS projects that would open the door for CCS deployment in the UK. This comprised £1bn of capital support plus the integration of CCS alongside renewables and nuclear in the new electricity market reform arrangements.
Internationally, the UK used the occasion of the Clean Energy Ministerial to commit £60m of funding for CCS development activities abroad for the period 2012-2018. The funding was drawn from the International Climate Fund, and counted towards the UK’s 2012 Overseas Development Assistance (ODA) spending. Climate Change Minister Greg Barker announced the award, stating: “We recognise that it is important to ensure CCS is deployed in developing as well as developed countries. The funding that the UK has committed today will support the development of new partnerships and capacity building activities in emerging markets.”
Making progress: 2012-2015
Over the past three years, this UK funding has been channelled via the Asian Development Bank (£35m) and World Bank (£25m) to support CCS activities in China, Indonesia, South Africa and Mexico, as well as broader regional analyses and capacity building. The Department of Energy and Climate Change helpfully provides an overview of the programme, highlighting that “The current evidence presents a clear case that CCS is a critical ‘transformative’ technology to combat climate change; and that demonstration in developing countries needs to take place in parallel to developed countries.”
In addition, the UK should also be praised for its transparency about the progress of the programme’s deliverables. It has published its original business case and intervention summary, plus annual reports on progress with project development and policy engagement. These make clear how the programme has taken care to focus on access to geological storage as a key enabler of CCS deployment, and how gas CCS will be a key technology option and priority area for investment. It also guards against UK funding being used to support the construction of coal-fired power plants. There was a clear strategic logic for this CCS investment, considering not only its technical ability to reduce CO2 emissions, but also its value as a means of enabling greater diplomatic engagement and political commmitment.
Taken together, these domestic and international efforts provided a coherent set of actions to advance CCS in ways appropriate to the UK and its overseas partners. This was a welcome change from the failings of the first UK CCS competition which had taken a simplistic view that the UK should invest in post-combustion CCS for coal power plants for future export to China. This was inappropriate for the UK context, and incorrectly treated CCS as a power plant bolt-on, rather than as an infrastructure category. Similarly, the early UK and EU support for the NZEC coal CCS project in China had made slow progress in the absence of a broader approach to tackling regulatory and policy requirements.
Shock cuts vs positive progress
After grinding their way through three years of government process the bidding projects for the replacement Commercialisation Programme were four weeks away from submitting their final proposals. Then last week came the shock announcement that the Treasury had summarily cut the capital funding intended for projects. This outrageous handling of its own programme will not be easy for the UK government to shake off.
In contrast, the UK’s international CCS programme is bearing fruit, at exactly the moment that Treasury cuts are putting the whole of the UK’s domestic CCS endeavours in peril.
To take just China as an example, UK support is helping China take forward a pilot-scale full-chain CCS project in Tianjin and setting up two CCS centres of excellence. One of these will be led by the UK-China CCS Centre supported by the University of Edinburgh. The UK has also been proactively supporting the development of the Guandong regional CCS initiative, with expert input from UK academia and strategic guidance from the Foreign and Commonwealth Office.
This should have been a big week for UK-China CCS cooperation, coinciding with the Paris climate negotiations. On Monday, the UK’s White Rose CCS project was due to sign an agreement with a Chinese utility as part of its final submission to the UK commercialisation programme. That has now been canned, as UK projects seek urgent clarification as to whether there is any prospect for CCS in the UK at all.
Then yesterday Paris saw the launch of the Roadmap for CCS demonstration and deployment in China. A joint project between China’s National Development and Reform Commission and the Asian Development Bank, the roadmap considers both the practical project experience and policy and regulatory reforms required to enable CCS and accelerate CO2 emissions reductions in China. It also forms a core part of the continued cooperation between China and the Asian Development Bank.
And why does that matter for the UK? Well, firstly it has the embarrassment of being cited as an example of best practice. But more fundamentally, it was UK funding to the ADB that paid for the China CCS roadmap report in the first place.
The UK Chancellor’s CCS money-grab doesn’t look so smart now. He’s not only damaged the prospects for the UK’s domestic decarbonisation efforts, he’s also left the UK in the hypocritical position of ‘do as we say, not what we do’. If George Osborne wants to become Prime Minister he will need to be more of a diplomat and less of a bean counter.