UK: UK Government Gets Serious About Carbon Capture

Last Updated: 23 March 2010
Article by Michael Hutchinson

Originally published 19 March 2010

Keywords: UK Government, carbon capture, Carbon Capture and Storage, CCS, CCS technologies

The UK Government has now unveiled its industrial strategy for the development of Carbon Capture and Storage (CCS), showing its intent for the UK to become a global leader in these new technologies. CCS has the potential to be applied across the globe, and successful implementation in the UK could accelerate this process.

Government estimates put the potential value of CCS to the UK economy as high as £6.5bn per year by 2030, and sustaining up to 100,000 high-value jobs. It is envisaged that CCS will play a key role in the UK's strategy to meet its climate change goals as the new technologies could reduce CO2 emissions in power stations by 90%.

Process

CCS is a three-stage process involving: Capture of CO2 through p re-combustion, post-combustion or oxy-fuel methods;

  • Transport of the gas (by pipeline) to designated storage points;
  • Safe storage in geological sites such as depleted oil and gas fields and saline aquifers.

Although these individual processes are not new in themselves, the whole chain has yet to be demonstrated on a commercial scale.

Background

CCS was one of three options considered by the UK Government's Carbon Abatement Technologies (CATs) strategy published in 2005 in order to set about reducing CO2 emissions from fossil fuel combustion plants. The EU then passed a CCS Directive in 2009 which laid down a compliance framework for the implementation of CCS technologies. It also provides for the assessment of 'CCS readiness' among all newly authorised operators of combustion plants of 300MW or more of electricity. The Directive must be implemented by Member States by 25 June 2011 and, with this in mind, the UK Government expects to consult on draft regulations before the end of 2010. The UK has already established the enabling provisions for regulating CO2 storage in the Energy Act 2008, which requires a licence for all activities relating to storage.

UK Strategy

The UK Government considers itself in an ideal position to facilitate the development of CCS. It sees the geological structures in the North Sea as offering some of the best potential CO2 storage sites in Europe. The Government also believes the UK has the engineering and project management infrastructure required for the successful construction of CCS projects, as well as the financial and legal expertise needed to deliver them. It has signalled its intent by designating the Yorkshire and Humber region as a Low Carbon Economic Area (LCEA) specifically for the implementation of CCS, aiming to take advantage of its geographic, academic and industrial assets to maximise development of knowledge and experience.

Funding

The UK Government intends to adopt a programme of four commercial-scale CCS projects in order to demonstrate each stage of the process and is running a design competition to procure a CCS demonstration plant. This will be funded by a new CCS levy which is part of an Energy Bill currently under the consideration of Parliament. The total funding requirement for the intended demonstration is between £7.2bn - £9.5bn which is expected to add around 2-3% to consumers' annual electricity bills in 2020, falling to a 0-2% addition by 2030.

Next Steps

One of the aims of the development programme is to have CCS ready for commercial deployment by 2020. An important next step in the CCS process is the creation of an Office of CCS (OCCS), as part of DECC, to oversee the demonstration projects. The UK Government is confident that these projects will prove successful as it is keen to ensure that initial investments in pipeline infrastructure are sufficient to anticipate likely future demand. Although the demonstrations are not expected to generate large amounts of legally protectable new technology, where this does arise the developers will be expected to share the knowledge with third parties on a fair and reasonable basis.

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Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Copyright 2010. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.

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