Osborne’s cancellation of Peterhead carbon-capture scheme could cost UK more than £30bn, say MPs

Peterhead power station
Peterhead power station

The decision of the then Chancellor George Osborne to cancel the Peterhead carbon-capture competition last year will impose a 15-year time lag on the industry in the UK and may also increase the costs of meeting CO2-reduction targets.

A report by the National Audit Office published today also reveals that the now-abolished Dept for Energy (DECC) told the UK chancellor this during last year’s spending review – ie before Osborne made his announcement –  ie that without large scale deployment of carbon-capture infrastructure, it could cost the UK an additional £30 billion to meet the UK’s 2050 carbon targets.

This is because a more expensive mix of low carbon technologies would be required to decarbonise without it.

The decision has also been widely criticised as preventing Scotland/ the UK developing a competitive global advantage in carbon-capture storage technology – not least because of the existence of large-scale infrastructure in redundant oil and gas pipelines in the North Sea.

A number of independent expert reports for organisations such as Scottish Carbon Capture and Storage, have also confirmed the suitability of local sites.

The Environmental Audit Committee of MPs in the Commons commissioned this report from the NAO as part of its inquiry into Sustainability and the Treasury. The Committee will question Treasury Ministers and officials as part of the inquiry. Other key criticisms in the NAO report on Sustainability in the Spending Review include:

The Treasury did not make the most of the opportunity to encourage departments to work across government on environmental issues

Neither DECC or the Treasury quantified the cost of delaying large scale deployment of CCS, although DECC did estimate the cost of meeting long term targets without CCS.

Departments with lead responsibility for the environment will have their budgets reduced.

Before the spending review was published, the Government forecasted that it was not on target to meet its carbon budget for the mid-2020s by a gap of around 10%.

Labour MP Mary Creagh, Chairman of the Environmental Audit Committee, said: The last minute cancellation of support for carbon capture and storage may have delayed the roll-out of this crucial technology for a decade or more.

“Carbon-capture is essential to meet our 2050 climate change targets and it is critical that government establishes a new strategy for supporting large scale deployment of CCS, as without it, the eventual bill for cutting our carbon emissions could be up to £30 billion more.

“There is a gap between our stated ambitions on climate change and the policies and spending the Government is bringing forward to get us there. According to the Government’s own calculations we are on track to miss our carbon budgets in the 2020s by 10% –  yet the Spending Review <which included Osborne’s decision to axe the Peterhead project> took us no closer to closing that gap.”

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