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Industry warns against "disastrous" carbon capture funding

The carbon capture and storage (CCS) industry has expressed grave concerns at reports the government is considering scaling back its £10bn plan to fund a series of CCS demonstration plants in the UK as part of its efforts to restore health to the public finances.

The Guardian reported yesterday that Treasury officials have warned that the government plan to fund the development of up to four CCS plants could be cut as a result of renewed spending constraints.

Luke Warren, International Policy Executive at the Carbon Capture and Storage Association, warned that any such cuts could jeopardise both the UK carbon emission targets and the health of the country's emerging CCS industry.

"If these report are true they make for dismal reading," he said. "The UK government has been a leader on CCS but it is now in danger of falling behind the pack in the race to develop this crucial technology."

The government is officially committed to funding one plant entirely through its CCS competition - an award expected to be worth around £1bn.

In addition, earlier this year climate change secretary Ed Miliband said the government would fund between one and three further CCS plants and that no coal power plant would be given the go-ahead in the UK without CCS attached.

A spokeswoman for the Department of Energy and Climate Change attempted to dopwnplay the reports insistig there had been no official change to the government's CCS funding plans.

"The UK has set out bold proposals for coal and CCS - they are a world first - and our ambitions remain firm," she said. "We're determined to drive the development of CCS as part of the transition to a low carbon economy."

However, industry sources noted that the government had never officially committed to funding all four proposed plants and that as a result it could cut the number of demonstration plants back to two without technically reneging on its promises.

The announcement in April this year said the plants would be funded by a two per cent levy on electricity bills between now and 2020, as well as funding from the EU economic recovery package - due to be formally awarded by next month - and proceeds from the EU emissions trading scheme.

Another industry insider argued that none of this funding comes directly from Treasury coffers and as such the suggestion that cuts to the CCS programme would be required to help comply with renewed public spending constraints was disingenuous.

However, the Treasury would still need to approve any new levies as they would amount to a tax and therefore assigning the proceeds to CCS projects would be treated as public spending.

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