The planned funding of £1bn for development of carbon capture and storage (CCS) projects in the UK has been scrapped following the Autumn Statement.
The funding was available as part of a competition to develop technology capable of removing carbon dioxide from fumes made by fossil fuel-fired power plants and other industrial facilities. The fumes would then be stored in underground reservoirs.
Two prospective large-scale projects were competing for the funding – one at the gas-fired plant in Peterhead, Scotland, proposed by Shell and SSE, the other called the White Rose project at the UK’s biggest coal-fired power station, operated by Drax.
Both projects are now facing cancellation.
"Without that funding, we no longer see a future for the Peterhead project in the near term," a spokesman for Shell said.
The CEO of Capture Power, one of the companies behind the Yorkshire-based White Rose project, expressed similar uncertainty about the scheme’s future. "It is too early to make any definitive decisions about the future of the White Rose CCS Project,” he said. “However, it is difficult to imagine its continuation in the absence of crucial government support."
The announcement comes as the world leaders assemble in Paris to discuss how to stop average global temperatures from rising beyond the 2°C threshold deemed safe by climatologists to prevent extreme climate change effects.
According to the International Energy Agency, CCS could help reduce the global emissions by one sixth of what is needed by 2050.
The UK has previously considered CCS a vital component in its battle to cut emissions by 80 per cent by 2050.
"Only six months ago, the government's manifesto committed £1bn of funding for CCS,” said Luke Warren, CEO of Carbon Capture and Storage Association, describing the government’s decision as ‘devastating’.
“Moving the goalposts just at the time when a four-year competition is about to conclude is an appalling way to do business.
"This announcement is a real blow to confidence for companies investing in CCS.”
According to the manufacturer’s organisation EEF, CCS is the only option to reduce greenhouse gas emissions in some sectors such as steel and cement making.
"Whilst we understand that the government has had to make some extremely tough decisions, this one is not in the long term interests of the UK economy or energy consumers,” said Claire Jakobsson, the organisation's head of climate and environment policy.
"CCS has the potential to halve the costs of decarbonising the UK economy by 2050, which amounts to £32bn a year by 2050.”
Widespread adoption of CCS technologies around the world has so far failed to take off. Last year, Canadian utility Saskatchewan Power opened the world's first coal-fired power plant retrofitted with CCS last year.