Beyond Track 1: Creating a self-sustaining CCS market

Policy Brief on a long-term policy mixes for CCS deployment in the UK.

by Carbon Balance Initiative and Oxford Net Zero, 2024

Mirte Boot, Ingrid Sundvor, Rachel Ardiff, Stuart Jenkins, Myles Allen

The new Labour government is committed to achieving the UK’s legally binding net zero targets by 2050, which includes ambitious carbon storage goals. To support this commitment, the government has launched its industrial decarbonisation agenda with a £21.7 billion investment in decarbonising industrial clusters, with a focus on deploying Carbon Capture and Storage (CCS).

This brief provides an analysis of the current CCS policy landscape. It highlights potential benefits and risks of the current policy approach, which aims to transition from government subsidies to a market-led system, primarily driven by the Emissions Trading System (ETS). While this approach has initiated CCS deployment, it may be insufficient to create a self-sustaining market, reduce subsidies, or meet long-term storage targets. We highlight the potential of supplementing existing policies with a carbon storage mandate, specifically a Carbon Takeback Obligation (CTBO). By combining market mechanisms, mandates, and targeted government support, the UK has an opportunity to develop a cost-effective, resilient CCS sector. Designed well, this policy approach has the potential to align with net zero targets, stimulate investment in industrial regions, and demonstrate global leadership in the clean energy transition, all while enforcing the polluter pays principle.