Carbon capture and storage (CCS) forms just one part of the complex industrial decarbonisation jigsaw, with UK Government committing £1bn through its CCS Infrastructure Fund to deploy the technology at scale, initially in the Hynet and East Coast industrial clusters. As with any decarbonisation technology or pathway, understanding the wider economic and societal impacts of CCS will be critical to its effective deployment and contribution to wider efforts to meet net zero targets by 2050. Research presented in a new report by the Centre for Energy Policy (CEP), has found that CCS offers a number of green growth opportunities, but these could also pose some difficult choices and tensions in relation to achieving other policy priorities such as the regional levelling-up agenda.
Professor Karen Turner, Project Lead and Centre for Energy Policy Director said:
“The world is facing a climate emergency and decisive action on industrial and other decarbonisation areas is critical. However, action must focus on ensuring prosperity, enabling just transitions for all citizens and avoiding simply shifting emissions, jobs and investment overseas.
Lessons from our research on carbon capture and storage in the UK suggests there are potential gains to be had in terms of jobs and economic growth, and which could offset the costs of the investment needed. But how these upfront costs are met, by whom, when and where, is crucial.
Our research shows that if costs are borne disproportionately by firms, workers and households in particular geographical regions, then the potential benefits of CCS could be eroded, undermining efforts to deliver on other policy priorities such as addressing regional inequalities through the levelling-up agenda.”
CCS and green growth opportunities
CEP’s research examines the wider economy effects of differing types of policy choices and economic conditions for the delivery of industrial CCS and the transport and storage sector needed to service it. While our research is focused on the UK, important lessons can be drawn for other international contexts.
One such lesson is that while there are costs involved in introducing CCS to the economy, which could negatively impact on international competitiveness and GDP, they could be recouped over time with technological progress and efficiency gains. Importantly, investment in establishing this industry could also bring green growth opportunities. In particular, developing a new CO2 transport and storage sector to service the key industrial clusters, could be associated with an additional £1.7billion GDP per annum and up to 17,000 new full-time equivalent (FTE) additional UK jobs, including 5,630 T&S industry jobs implying a multiplier of around three UK jobs.
Potential tensions between deploying CCS and levelling-up
Yet realising these opportunities and mitigating any risks will depend on a fundamental recognition of the importance of ‘who pays’ and ‘when’. One of the key findings from this research is that asking emissions-intensive industries, such as the chemicals industry, to bear the costs of deploying CCS ahead of international competitors, could lead to negative economic outcomes for all but a few sectors, and particularly those regions and communities most closely linked to the emitting industries. We note that this could have a detrimental impact on regional levelling-up efforts. Specifically, where we modelled an ‘industry pays’ scenario, the net per annum impact on GDP was a contraction in the UK economy of almost £1billion, with almost 15,000 UK jobs lost by 2040.
However, when we considered a case where policy support is provided in the form of a taxpayer funded subsidy to the chemicals industry to offset the competitiveness loss, we found that both regional and wider economy outcomes could be more favourable.
Fundamental lessons for Net Zero transitions
While this report focuses specifically on CCS, there are some fundamental lessons for net zero transitions more broadly, and that underline the importance of framing these as public policy not just technological challenges. These lessons are around how upfront costs and losses can be recouped as technology progresses and efficiency gains are made, the importance of productivity gains in terms of alleviating resulting consumer price pressures, and finally, the critical importance of assigning the best policy approach and funding model in relation to the effective design and delivery of any decarbonisation technology or pathway. Consideration of these factors will be essential to driving net zero transitions that generate future sources of value and jobs and deliver tangible benefits for all people in all regions.