Jeremy Hunt’s first spring budget as Chancellor saw him announce a range of climate-focused measures, including innovation funding for nuclear energy, an extension to the Energy Price Guarantee (EPG), and a £20 billion support package for carbon capture technologies.
The UK government had previously earmarked carbon capture, usage and storage (CCUS) as a critical feature of the nation’s move towards net zero. CCUS technology is used to capture carbon dioxide created from activities such as power generation, the production of hydrogen, and industrial processes. Rather than the greenhouse gas being released into the atmosphere, it is instead stored- usually deep underground. CCUS uses many of the same processes as CCS- both see Carbon dioxide captured; however, with CCUS, the ‘U’ or ‘usage’ sees captured CO2 from industrial processes utilised and converted into goods such as concrete or biofuel. As a result, CO2 usage does not necessarily reduce emissions nor deliver a net climate benefit once indirect, and other effects have been accounted for: “For example, Enhanced Oil Recovery (EOR), which injects CO2 into oil and gas reservoirs to increase extraction, is one of the most well-known forms of CO2 usage and has been employed for decades.”[ii]
In its ‘Ten point plan for a green industrial revolution’ which was released during the covid-19 pandemic in 2020, the government, led by Boris Johnson at the time, stated:
“Our ambition is to capture 10Mt (million tonnes) of carbon dioxide a year by 2030, the equivalent of four million cars’ worth of annual emissions. We will invest up to £1 billion to support the establishment of CCUS in four industrial clusters, creating ‘SuperPlaces’ in areas such as the North East, the Humber, North West, Scotland and Wales.”[iii]
By 2050, the IPCC suggest that globally, 10 billion tonnes of CO2 may need to be captured by negative emissions technologies annually as we approach 2050 to avoid what they term “catastrophic climate change”[iv]. In the budget, Jeremy Hunt announced that a new £20 billion CCS package, to be spent over the next 20 years, would see the UK’s target for carbon capture increase substantially, from the 10Mt per year by 2030 in the ten point plan, to between 20-30 Mt by 2030 in this latest announcement[v].
Critically, is carbon capture the net zero elixir that some have claimed? We explored this very argument in our blog last year which you can read here.
Nuclear energy also received a boost during the budget, with the chancellor announcing that he would open consultation on classing nuclear power as "environmentally sustainable" to encourage more private investment into the sector. Further, Jeremy Hunt said he would boost investment in small modular reactors (SMRs), such as those developed by Rolls-Royce. Hunt said: “I am launching the first competition for Small Modular Reactors. It will be completed by the end of this year and if demonstrated to be viable we will co-fund this exciting new technology."[vi]
The government announced £210 million in funding for Rolls-Royce back in 2021 to back the company’s SMR programme, which could see Rolls-Royce open factories to build the reactors in Britain[vii]. "Rolls-Royce SMR has called for rapid progress from the government and we welcome the adoption of that principle in this process," Tom Samson, CEO of Rolls-Royce SMR, said in a statement[viii]. He added that SMRs were “a British solution to the global energy crisis,” having previously claimed the reactors could be mainly built in factories with 80% UK-sourced components.
A separate announcement on energy matters saw the Chancellor confirm that the Energy Price Guarantee (EPG) would be kept at £2,500 for an additional three months from April to June. The latest Ofgem imposed price cap would have seen UK households facing annual bills of £3,280 from 1st April if the EPG had been removed. However the government has said that maintaining the EPG will see UK consumers save £160 on average.
Whilst several high-profile announcements were made in this year’s spring budget, many green groups and organisations were disappointed by the lack of renewables and energy efficiency measures. Specifically, whilst nuclear has been labelled ‘environmentally sustainable’ hydrogen, which requires greater policy support to transition towards cleaner production, it was omitted. It is worth noting, however, that government response to the Skidmore review is expected later this month, and it is likely we will see the UK’s net zero strategy addressed then, with more detailed announcements on renewables made.
Emma Pinchbeck, Chief Executive of Energy UK, said:
“The only long term route to bringing down bills is through a rapid expansion of clean, cheap, homegrown power and reducing our dependence on the expensive fossil fuels that have led to record bills over the last year. While the funding for Carbon Capture projects and the commitment to small nuclear reactors is welcome, the Government must now act to address growing concerns over rising costs, supply chain difficulties, a poorly designed windfall tax, and planning and infrastructure delays that all threaten the billions of pounds of investment needed for the build out of low carbon generation.”[ix]
[i] Budget 2023: Chancellor Jeremy Hunt's challenge is whether voters will feel the benefits fast enough | Politics News | Sky News
[ii] What is carbon capture, usage and storage (CCUS) and what role can it play in tackling climate change? - Grantham Research Institute on climate change and the environment (lse.ac.uk)
[iii] The Ten Point Plan for a Green Industrial Revolution (publishing.service.gov.uk)
[v] Spring Budget: Chancellor unveils £20bn CCS funding, energy relief support and nuclear package - edie
[vi] UK launches competition to support small nuclear reactors (msn.com)
[vii] UK backs new small nuclear technology with £210 million - GOV.UK (www.gov.uk)
[viii] Rolls-Royce Holdings PLC welcomes government’s new stance on mini-nukes (proactiveinvestors.co.uk)
[ix] Energy UK responds to the Chancellor's Budget Speech | Energy UK (energy-uk.org.uk)
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”
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