Sussex Energy Group at SPRU

By Roman Sidortsov

If there is ever a Hollywood film to be made about climate and energy legislation, the enactment of the Inflation Reduction Act (IRA) will provide as good of a script as there will ever be. Typically mundane, the passing of the largest climate bill in U.S. history featured many twists and turns, ups and downs, and grand finale speeches about saving the world. The process features the transformation of a climate villain, Senator Joe Manchin, who infamously shot the text of a cap-and-trade bill in a political ad in 2010, into an unlikely climate hero who resurrected the legislation that he killed just a few weeks ago. The bill’s authors employed clever branding – the Inflation Reduction Act – to make the bill more palatable to not only climate activists but also fiscal hawks and the public concerned with rising prices. The drama had been omnipresent until the very end – just when all the hope of the Democratic Party to deliver on a President Biden’s signature campaign promise was lost; a compromise struck between the villain-turned-hero and the Senate Majority Leader, Chuck Schumer saved the day.

In a Hollywood film, the story would probably end there –Biden’s speech celebrating the legislation, the footage of the president at the COP27 emboldened by the act’s promise, and the narrator partially attributing the Democrats’ success in the 2022 midterm elections to this legislative victory. Yet the true value of legislation is not assessed by the dramatics and heroics behind its enactment but by the impact that it brings. 

---

The IRA in a Nutshell

Despite not containing ‘climate’ or ‘energy’ in its title, the IRA is a piece of legislation aimed at combating climate change. Although it does contain measures aimed at softening the wrath of inflation and reducing the budget deficit,largely through reducing future energy costs, the bulk of its provisions is related to supporting the decarbonization effort in the United States. These provisions that are largely ‘carrots’ are plentiful and diverse in their approach, size, and scope. Some are controversial to the point of drawing the ire of environmental NGOs as pro-fossil fuel, like the requirement for the government to offer additional areas for oil and gas development to allow the same for wind and solar projects.

Yet at the IRA’s core is $369 billion to be invested in a systemic effort to decarbonise the U.S. economy. Many measures are logical policy options supported by favourable cost data and equitable distributional impact, like a 10-year extension of the 30% residential solar tax credit and energy efficiency subsidies. A few can only be explained by the irrational political economy of the energy transition. For example, even one monumental failure after another was not enough for federal and state lawmakers to stop showering carbon capture and sequestration (CCS) developers with billions of dollars in financial subsidies. 

Yet, the questionable abbreviation and a handful of economically and environmentally puzzling but politically necessary provisions aside, the largest climate bill in U.S. history is projected to produce significant greenhouse gas (GHG) emission reductions. According to the federal Office of Management and Budget, investments under the IRA are likely to result in a 40% reduction of GHG emissions by 2030 compared to 2005. Independent experts agree, putting the estimated impact on par with that of the federal government. 

---

How the IRA Compares to Other Climate Bills

Judging by the title alone, the IRA is as far from the ambitious Green New Deal proposal as it can be. It is a fraction of Senator Bernie Sanders’ $16.3 trillion plan to combat climate change and the Democrats’ initial $3.5 trillion budget aspiration. However, under the politically savvy bonnet is a lean and mean collection of Green New Deal-esque policies that, according to the aforementioned modeling, is set to deliver. The IRA builds on the successes and failures of the American Reinvestment and Recovery Act (ARRA), a signature legislative energy achievement of President Obama. It is fundamentally different than the failed 2009 Waxman-Markey cap-and-trade bill that relied mostly on “sticks.” 

The IRA is the largest climate legislation by a developed country. It might not have the whole system approach of the French Transition Law, the multi-stage approach of Germany’s Energiewende, or the ambition of the European Green Deal. However, it has $369 billion of federal funding aiming to capitalise on what America does best – create conditions for the private sector to reorient its economy. 

---

Why It Will Succeed

Projecting the impact of legislation aimed at bringing dramatic changes to the world’s largest economy during a global energy crisis is a difficult task. Will politicians and voters have second thoughts about staying the course? Will the industry embrace systemic changes and respond to IRA incentives? These types of questions need to be taken very seriously by the agencies charged with IRA’s implementation, but there is plenty of empirical evidence and structural reasons why the legislation will become a success.

Firstly, as noted above, the IRA builds on the ARRA’s financial “carrots,” which has been shown to have rescued the budding renewable energy industry in the United States in the midst of the global financial crisis. Some of the highlights include nearly quadrupling ARRA’s financial support whilst remedying several problems with using tax credits, such as the limited scope of eligible entities and transactional costs. Both production and investment tax credits for wind and solar are reinstated and expanded to other technologies. Perhaps the most important change is the longevity of the tax incentives, ten years. This means a consistent and predictable policy signal for private actors. Ladies and gentlemen, the United States has a lasting federal energy policy, perhaps for the first time ever!

Secondly, there are plenty of incentives for buy-in for consumers and households of all levels of income. Tax credits and rebates for heat pumps, credits for new and used electric vehicles (EVs), reinstated and extended residential solar PV credits, and many other reasons for Americans to make the energy transition part of their everyday lives. 

Thirdly, the explicit environmental and somewhat hidden energy justice provisions. These provisions not only acknowledge the harm done by the existing energy system but also allocate funds for remedying them. This is not just a matter of restorative justice – including low-income and/or non-white communities that bore the brunt of the harm into a broad and diverse energy transition coalition.

Fourthly, the IRA is as much of an industrial policy bill as it is a climate one. It incentivises investments in a wide array of domestic research and development activities and clean energy manufacturing capacities. It creates several procurement mandates placing school districts and the Postal Service as early adopters and demonstrators of energy transition technologies. It does not leave rural communities behind by expanding climate change-driven innovations into agriculture. And before one yells “Protectionism!” the COVID-19 pandemic showed us the importance of diversification of global supply chains. It is true that some EVs will lose the benefit of the U.S. tax credit; however, in the middle and long term, the new U.S. manufacturing capacity will increase diversity and, therefore, the security of global supply chains.

Fifthly, the bill’s authors were strategic in selecting occasional “sticks.” Perhaps the most significant of them is a fee imposed on fugitive methane emissions. Methane is a potent GHG that accounted for 10% of U.S. GHG emissions in 2019. Generally, large producers have been willing to curb fugitive emissions, with the bulk of the resistance coming from smaller companies. Having the support of large natural gas producers mitigates the resistance that the smaller ones put up in implementing this important measure.

Sixthly, it is important to remember that the IRA is not the lone climate warrior in the United States. This became particularly apparent during the previous presidential administration, whose rejection of the Paris Agreement led multiple states and cities to adopt ambitious climate goals. For example, since 2018, 15 U.S. states, the District of Columbia, and two territories have legislatively increased their renewable portfolio standards that require a certain percentage of electricity to come from renewable sources. Joining forces is rarely a bad idea, especially if doing so helps address the climate crisis.

I am certain that there will be bumps in the road of implementing the IRA. As many researchers know well, energy communication and education are not easy. The ways in which energy systems operate are often counterintuitive and nuanced. Thus, designing communications and outreach campaigns will require determination, innovation, and persistence. Yet, the IRA’s authors wrote the bill with a wide coalition and multiple win-win scenarios in mind. There is a great deal of hard work ahead, but the adventure of making the legislation a reality promises to be both exciting and transformative. For both America and the world. 

Follow Sussex Energy Group

One of the more challenging aspects of the net zero agenda is how to decarbonise heavy industry. Industries such as metals (including iron and steel), minerals, chemicals, food and drink, paper and pulp, ceramics, glass and oil refineries account for about 16% of UK territorial emissions, both from energy use and from carbon dioxide and other greenhouse gases produced directly from industrial processes, such as calcination in the production of cement. Industry is commonly seen as a ‘hard to abate’ sector of the economy. A lot of industry is also exposed to international competition, so unless there is support from government there is a risk that it will close down and relocate, rather than actually cut emissions.

Having made progress on the decarbonisation of electricity the UK, like many other countries, is now giving much greater focus to this agenda. As laid out in the 2021 Industrial Decarbonisation Strategy, the centrepiece of the UK’s approach is to slash emissions in a number of industrial clusters around the UK, with key roles for carbon capture and storage and for hydrogen. This approach has been backed by revenue support for high carbon industrial emitters to pay for carbon capture, and a new regulatory framework for carbon transport and storage similar to that in gas and electricity networks. Similar proposals for hydrogen are also being developed. In addition, £1 billion of grant support for carbon capture and storage infrastructure is being made available.

While the final level of support is as yet unknown, what is clear is where the initial funding for CCS and hydrogen will go. Two clusters – the North West cluster around Merseyside centred on the Hynet hydrogen project, and the East Coast cluster with hubs at Humberside and Teesside – have been designated as ‘Track 1’ clusters, meaning that projects will go ahead in the first phase of the strategy.

Other locations designated as industrial clusters in the UK, Southampton/Solent, South Wales, the Black Country, and the Scottish cluster linking Grangemouth and Aberdeen, are currently waiting for the development of a Track 2 framework of support. Scotland has been designated a ‘reserve’ cluster meaning that it would become Track 1 if one of the existing Track 1 clusters dropped out, although observers think there is little chance of this.

This pattern of early resource allocation is a consequence of an approach that prioritises efficiency in emissions reduction, i.e. focus on those regions where large proportions of emissions are concentrated. However, it also leads in practice to regional inequality in where funds flow, made more significant by the fact that most of the clusters include areas of high deprivation, historical job loss and under-investment. This inequality across the clusters has not gone unnoticed, and one question sometimes raised is whether there is a party political dimension, related to the ‘Red Wall’ phenomenon, where the Conservative Party won a number of traditionally Labour-held seats at the 2019 election in the north-west and north-east of England and want to hang on to them. This issue echoes debates over the allocation of the Towns Fund.

Voters in Conservative seats got almost £20 more per head than those in similarly deprived non-Tory constituencies in latest round of levelling up funding – ⁦@guardian⁩ analysis https://t.co/6QjBHBbB1X

— Pippa Crerar (@PippaCrerar) January 19, 2023

In focusing on this issue, it is important to be clear that this is not an assertion that resources necessarily have been allocated on political grounds. The selection of Track 1 clusters was a competitive process run by a government department using detailed criteria, one of which was the availability of geological storage for captured carbon dioxide. Each cluster bid had strengths and weaknesses. Rather it is based on the view that perceptions can matter, especially the perception that there may have been a parallel, more political process, and it is worth examining how perceptions relate to evidence.

Is there any evidence that policy support is being targeted to areas that the Conservative party is also targeting electorally, either through the decision to make funding conditional on the existence of storage capacity or in the decisions on which clusters should be Track 1?

The table below shows various indicators for cluster constituencies, identified from maps of the clusters in roadmap documents and the UK constituency map.

One approach to the ‘Red Wall’ question is to assess how many constituencies in a cluster were Conservative gains from Labour in the 2019 election. The two clusters with the largest number of such swing seats were the East Coast cluster (especially the Teesside area) and the Black Country cluster. While the East Coast cluster is a Track 1 cluster, the Black Country is not, as it lacks access to any storage capacity. The decision to condition Track 1 resources on such capacity thus cuts across the pattern of swing constituencies.

On the other hand, within those clusters with storage capacity (NW, East Coast and the Scottish Cluster), the East Coast cluster stands out as having the most swing constituencies. From an electoral politics point of view, we might thus expect it to be included.

The Scottish Cluster, which currently includes no Conservative seats at all, is at the other extreme. With Scotland, as with South Wales, there is the additional factor of the politics of devolution. Both devolved nations have governments led by parties that are in opposition in Westminster.

However, looking at seats which swung to the governing party at the last election is only one indicator of the logic of investing in locations that might represent electoral gain. Another approach is to look at how marginal seats are, indicating either the need to shore up support or the opportunity to gain seats at the next election. Based on the size of majorities at the 2019 general election, the marginality ranking runs from 1 (the most marginal seat) to 650 (the least marginal), with data sourced from the House of Commons Library.

On this measure, the NW/Hynet cluster has the largest number of highly marginal seats (i.e. with a ranking of less than 100), whereas the East Coast cluster and the Black Country come second with 4 each. The Scottish and South Wales clusters have the fewest highly marginal seats. Since many of the highly marginal constituencies in the East Coast and NW/Hynet clusters are currently held by Labour, these clusters also have relatively high numbers of seats that are in the top 100 targeted by the Conservative party, according to the Election Polling website. This type of evidence is thus consistent with an electoral interpretation of the allocation of industrial decarbonisation policy resources.

Yet another approach is to look at the original definition of Red Wall seats as developed by James Kanagasooriam. This was not based on the outcomes of election swings, but rather on the potential for Labour-held constituencies to swing to Conservative, based on social and demographic indicators such as home ownership, education and age etc., identified before the 2019 election, across a broad area of England from the West Midlands up to the North East.

There are actually very few of these Red Wall seats in any of the industrial clusters, with the exception of the Black Country where many were actually gained by the Conservatives in 2019. In the other regions of England, most of these ‘true’ Red Wall seats were not in the core industrial areas. On this measure, a party political interpretation would lead one to expect that policy resources would be focused on the Black Country, which is the opposite of what is observed.

A final factor in this picture is the role of mayors. Both Teesside and the Black Country (in neighbouring Birmingham) have high-profile Conservative mayors (Ben Houchen and Andy Street respectively) who have given public support to the development of their zero carbon clusters. A party political interpretation here is again split between supporting evidence for the East Coast cluster being Track 1 and contradictory evidence for the Black Country receiving no support. This interpretation is also complicated by the enthusiasm for the NW/Hynet cluster from Manchester’s Labour mayor Andy Burnham.

Where does this leave us? The strongest support for a party political interpretation for the allocation of industrial decarbonisation policy resources amongst clusters with storage capacity for carbon dioxide comes from the marginality rankings measure, taken together with the fractious relationship between the Scottish National Party (SNP) and Conservative-led Westminster government. However, a counter-argument to this interpretation is that a truly political allocation would have given funding to the Scottish cluster to strengthen the case for the Union, thereby undermining the SNP.

However, the decision to focus early industrial decarbonisation policy on CCS and hydrogen, and therefore on clusters with storage capacity, does not in itself make sense from an electoral politics point of view, given the high number of marginal seats in the Black Country.

Disclaimer: The views and opinions expressed in this blog are those of the authors alone and do not necessarily represent the opinions of the University of Sussex, the Sussex Energy Group as a whole, IDRIC, or any of its partners.

Follow Sussex Energy Group

As covered in last week’s blog, UK Prime Minister Rishi Sunak has reshuffled his cabinet and split the business energy and industrial strategy department in two. What does all this mean? Is it window dressing and intra-government manoeuvring or a necessary reset? Marc Hudson takes a deep dive. 

BEIS is dead! Long live the EsNZ! In an announcement last week, Rishi Sunak, currently the UK Prime Minister, reshuffled his cabinet and also rearranged some big government departments.

The big item, for energy and climate people, is that the Business Energy and Industrial Strategy department – created by Theresa May when she became prime minister in 2016 – was no more. BEIS had been created by an amalgamation of the Department of Energy and Climate Change (set up by the Brown government in the heady pre-Copenhagen climate talk days, during that the cautious but intoxicating  optimism of the Climate Change Act) and the Department of Business Innovation and Skills which was a successor to the long lived Department of Trade and Industry. 

DECC and BIS had collaborated and co-ordinated on a couple of interesting projects, including “road maps” (without drivers, or fuel or vehicles – just the ‘map’) at what UK industry could do around industrial decarbonisation and energy efficiency (answer – a bit of process changing, fuel switching and a lot of carbon capture and storage).

---

BEIS’ never-ending turf war with the Treasury

At the time of BEIS’ creation, environmentalists feared that the environment and climate change aspects would be lost within a mega department. This proved not to be the case under the leadership of Greg Clark and with ministers like Nick Hurd and Claire Perry. Issues like carbon capture and storage were picked out of the circular file where Cameron and Osborn had tossed them, and – within the broader industrial strategy  – sort of prospered however (see this blog on Sussex Energy Group’s site for the CCS  story).

But BEIS had already lost a part of the never-ending turf war with the Treasury when its industrial strategy was replaced with a more anodyne Build Back Better document last year. 

It’s of course too early to tell what all this means, though wags will doubtless talk about re-arranging the DECC-chairs. It will depend on many other factors. No doubt across Whitehall and Westminster (unmitigated) midnight oil is being burnt by politicians, trade associations, ambitious (and/or exhausted) civil servants, and lobbying companies, all of them trying to figure out the new organigrams and understand where old friends and enemies now sit, how that might affect their particular personal and sectoral interests and which levers and buttons now need pushing. 

---

Joined-up thinking is still in short supply

Whether policymaking and decisions about implementing existing policies suffer a short pause or longer turbulence remains to be seen. There have recently been repeated warnings (more like pleadings in their tone, tbh) about the need for quicker joined up thinking and doing, from outgoing MP Chris Skidmore, chair of a net zero review. And just last week five energy associations (including Renewables UK and the Nuclear Industry Association) wrote a “please help” letter to Chancellor Jeremy Hunt (see a very good account by journalist Sarah George, writing for the indispensable edie.net).

Analyst Christian Spencer captured the mood well when he wrote on Twitter:

As machinery of government changes go, this is not a bad set of rejigging. What matters more, of course is what you do with it, but all of these seem reasonable and some desirable. Also interesting how much this harks back to a previous set of depts, too: DTI and DECC both back. pic.twitter.com/VxdY29qLWZ

— Christian Spence (@ChristianSpence) February 7, 2023

Guardian economics journalist Larry Elliott has a typically intelligent column, both historically informed and peppered with juicy quotes form former big beasts (Heseltine, Cable, Mandelson). He has a quote from Nick Macpherson, the former top mandarin at the Treasury

For students of rearranged deckchairs, this seems strangely reminiscent of Gordon Brown’s 2007 vision: Department of Energy and Climate Change, Department of Innovation, Universities and Skills, and Department for Business, Enterprise and Regulatory Reform.

Nick Macpherson

The past is prologue

Britain did not have a climate change department per se, before 2008. Before 1970 it did not have an environment department at all. Environmental matters were handled by other departments. (The word “environment did not really have the meaning then that it does now. Issues were called “pollution.”)

My favourite example of this is that during the pivotal London Fogs of December 1952, which killed thousands and led indirectly to the wildly successful Clean Air Act of 1956. It was future prime minister Harold Macmillan, who was, as Minister for responsibility. He famously said, 

‘I would suggest that we form a Committee…. We cannot do very much but we can seem to be very busy – and that is half the battle nowadays’

Harold Macmillan

I made a video about this (of course I did), which you can see here.

"The Macmillan Manoeuvre" – a new short video. Not great, not terrible. Tell me what you think… Tips for improving general technique very welcome. pic.twitter.com/XXs9umj2D2

— All Our Yesterdays (@our_yesterdays) January 15, 2023

---

When did we start having departments for the environment?

A department for environment owes its existence to the concerns in the late 1960s about conservation. There was a building anxiety internationally – about the extinction of what we now call charismatic megafauna, and population growth. In the UK there was the aftermath of the Buchanan report into cars, and the rise of motorways.  More specifically events like the Torrey Canyon oil spill in 1967, the UN agreement to hold a big environment conference in 1972 and the fact that what we now call the EU was going to hold a European Year of Conservation. Groups like the (now defunct) Conservation Society were formed and beginning to mobilise. It’s forgotten now, but pollution was all the rage in the late 1960s and early 1970s.

Labour Prime Minister first mentioned “the environment” in its modern sense at a Party Conference in late 1969. Labour (and Later Liberal) Wayland Kennet was involved in both the creation of the first Environment White Paper (released in May 1970) and preparations for a department of the environment which he never got to head because Ted Heath’s Conservatives unexpectedly won the 1970 election.

(The whole period is neatly summed up in an engaging book called “The Politics of the Environment” written by one Stanley Johnson, father to the once and future Prime Minister Boris.]

Similarly, while Britain had often fixated on how it was going to supply energy to itself, a Department of Energy per se was only created after another crisis – that of the first “Oil Shocks” and coming of the three day week  led to an announcement in January 1974. Energy efficiency only really received a boost following a Presidential visit by Jimmy Carter in 1977. UK Prime Minister Jim Callaghan felt upstaged and his Energy Minister, one Tony Benn, “banged heads together” for an announcement.

Battles between the energy and environment departments have continued ever since, with the usual turf wars between Secretaries of State, and with ministers and their proxies butting heads, undermining briefing against pulling in opposite directions. It was really – despite lots of rhetoric beforehand – only between 2003 and 2009, that energy and climate (as distinct from environment more broadly) became finally entangled. It’s interesting to see energy security explicitly referenced now, as that was one of the concerns in 2005/6 that contributed to the entangling (here’s a nice 2014 blog by a very good academic, about just that).

---

What will happen next? 

I’ve given up trying to gaze into any crystal balls. As Danish physicist Niels Bohr (may have_ once quipped, “prediction is very difficult, especially about the future.”  However, the following seem safe-ish bets in the short-term.

• Energy prices will stay high for businesses and residential users.
• Even if/when they come down, users will not see an enormous amount of relief, 
• The push towards renewables and energy efficiency will continue. But this does not mean that big business is somehow “replaced.” See this about US battles.
• Community involvement and engagement in energy systems will remain both tremendously difficult and tremendously important.

Meanwhile the “boring” but crucial battles with Treasury – about what to fund and how to fund it – will go on. It may be that with BEIS split, all Treasury has to do from here on is a mopping up operation.

---

Other Reading

Rafael Behr in Grauniad – “A large part of the Conservative party is allergic to government meddling in the economy on the scale required for a dash to green tech. The impulse for radical economic reinvention has already been spent on a different revolution, Brexit, whose keenest Tory advocates believe the best thing the state can do for enterprise is get out of its way.”

Mitya Pearson writing on The Conversation – How climate change could fare in the UK’s new Department for Energy Security and Net Zero

Edie on 7th Feb Prioritising net-zero or ignoring non-energy emissions? UK’s green economy reacts to Sunak’s department shake-up

Follow Sussex Energy Group

By Matthew Lockwood

What does today’s restructuring of government departments mean for climate policy? Badged as being about making government deliver, the Prime Minster announced a relatively major reorganisation, with the Department for Business, Energy and Industrial Strategy (BEIS) being broken up, a new Department for Energy Security and Net Zero being created and business going to international trade to form a new Business and Trade Department. Meanwhile the innovation parts of BEIS will be merged with digital in a new science, innovation and technology department.  

Sunak’s rewiring of government departments reflects his pledge to create a new stand-alone energy ministry during last year’s Conservative leadership election, reflecting the PM’s apparent desire to bring climate back up the agenda. On the face of it, this move takes us back to the Department for Energy and Climate Change (DECC), created in 2008 and lasting until 2015. 

So is this good news for better energy policy and for accelerated action to get us to net zero? 

The positive take is that bringing energy and net zero out of a larger department creates focus. It should help government on delivery, which the recent Skidmore review of net zero identified as the key problem. 

A more negative perspective is that this move risks ghettoising the climate agenda in one department, which was a drawback with the DECC arrangement. DECC became the prime point of contact for the Climate Change Committee, and getting other departments to engage on emissions reduction was an uphill struggle as it lacked clout and authority. When DECC was disbanded and energy and climate policy were merged into BEIS, there were fears that they would get lost, but in fact these agendas had wider influence, for example, over an resurgent industrial policy agenda. However, delivery has not been so easy, and in areas like industrial decarbonisation, tied closely to energy prices and competitiveness, there is now a danger that policy may become more incoherent. 

In fact, it could be argued that this issue, i.e., ensuring all departments engage with the climate imperative, is much more important than it was back in 2015. The electricity system is decarbonising quickly and while huge energy challenges remain, such as decarbonising heating, reaching net zero now needs action across other policy areas, including transport, farming, industry, and diet. This suggests that what is needed is not just a different carve up of line departments, but stronger coordination and political direction from the centre, i.e., both the Treasury and No. 10.  

Major initiatives in UK energy and climate policy are deeply dependent on engagement from the Treasury (HMT). From kick starting the Energy Market Reform at the end of the 2000s to limiting the growth of onshore renewables over the 2010s to cancelling money for carbon capture and storage and then reinstating it, the hand of HMT is clearly visible. At the same time, active leadership is needed from the Prime Minster. Boris Johnson created a cabinet committee on climate change, which is one model, but without strong political backing it didn’t actually achieve very much.  

So without some serious political energy from the top, there is a risk that, in the words of Greenpeace, today’s changes are ‘rearranging deckchairs on the Titanic’. But there are deep-seated reasons why political will on climate policy in the UK is typically patchy. This is partly about imposing investment costs (for example, estimates of investment needs for decarbonising the heating of homes are in the hundreds of billions) in what has become an increasingly low wage economy. It is also particularly difficult for the Conservative leadership, with risks lying not so much with attacks from the opposition, but rather from risks within the party, which is ideologically split over the extensive intervention needed. 

Overall, then, today’s redrawing of departments may mean some acceleration of decarbonisation in energy, but will not in itself give us the coordinated approach with strong leadership from the top that we now need. 

Follow Sussex Energy Group

By Marc Hudson

Carbon Capture and Storage (CCS) is often promoted as a technology that will square circles.  One of those circles, in the United Kingdom, is the political need to “level up” the industrial left-behind areas of the north (the so-called ‘red wall’ seats) while also pushing towards a “net zero” economy by 2050.

The idea, that we can catch and bury carbon emissions while also helping steel, glass, cement and other heavy industry sectors become ‘zero carbon’ and keep people in jobs is seductive, and has many political backers.

Right now, CCS looks to be “all systems go”, with Government encouragement for both projects to capture carbon from power plants and factories and in to producehydrogen from natural gas on the East Coast and in the North-West (HyNet). Other projects in Scotland and elsewhere likely to get funding soon. Business models have been developed, contracts ­­­prepared and final investment decisions being pondered.  If – and it is a big if – everything goes as plan, millions of tonnes of carbon dioxide which would otherwise reach the atmosphere and cause our already overheating planet to warm even more will instead be diverted to where they some of them came from originally –oil and gas fields under the North Sea which are now empty.

The UK’s current CCS policy, involving a network of pipeline infrastructure connected to multiple industrial plants and then on to offshore storage sites is closely bound up with the approach to decarbonising industry by working through a ‘cluster’ approach, with “zero carbon” clusters helping the UK to achieve “Net Zero by 2050.”

But what is striking about CCS now being a key mitigation option is the stark contrast with  only a few years ago.

On 25^th November 2015, six months after the election which the Conservative Party gained power without having to negotiate with the Liberal Democrats, Treasurer George Osborn announced his spending plans.  Rather than headline the fact that a CCS competition, worth a billion pounds, was being cancelled, a press release was ‘snuck out’.

The Carbon Capture and Storage Association (the main trade body lobbying for CCS) is, like any lobby group, usually quite emollient when disappointed.  On this occasion, they pulled no punches in their press release:

“Today’s announcement that the funding for CCS will be cut is devastating. Only six months ago the Government’s manifesto committed £1 billion of funding for CCS. Moving the goalposts just at the time when a four year competition is about to conclude is an appalling way to do business.”

However, CCS had already had a long and rocky road.  In 2004/5 Prime Minister Tony Blair had spoken of it approvingly.  Back thent climate concerns were growing and the expectation that coal would continue to be a major part of the UK energy mix. But when BP proposed a CCS scheme in Scotland, Treasury refused to give clarity about whether “renewable obligation certificates” would be offered. BP pulled the plug.  A tempestuous first attempt at a CCS competition saw gas-fired power plants be added to the potential winners, and  public protest about CCS as a “Trojan Horse” to allow the oil and gas industry to keep doing what it does. That competition had petered out in2011, after Treasury abolished a levy designed to fund it, and the last remaining competition entrant gave up.   Meanwhile, European Union funding efforts were going nowhere, the Australian Government had pulled the plug on most of its efforts and demonstration projects in the USA and Canada were beset with time and cost over-runs.

Even the biggest fans of CCS were doubtful about its future. Lord Oxburgh in his 2016 review admitted in a letter to the relevant minister that “after so many false starts I began this study, as I know a number of my colleagues did, quite prepared to advise you to write-off CCS as a part of UK energy policy.”

---

How it came back

Exactly three years after the controversial decision by Osborne, the UK government was hosting a major international CCS conference in Edinburgh, and releasing its “Deployment Pathway.” It was also setting in train intensive work on the creation of business models and the regulatory framework for CCS.  How did this dramatic turn-around – a Lazarus-like revival – come to pass.

Our research suggests that a combination of factors.

Internationally, the Paris Agreement had focussed attention on increasing ambition around climate change. There had also been various initiatives such as the “Oil and Gas Climate Initiative” of the CEOs of (mostly European) oil companies, lending increased legitimacy to CCS initiatives.

The UK government (only a week after cancelling the CCS competition) participated in the COP21 climate conference in Paris, and signed up to reducing emissions in line with a two degree target.  A year later the UK government ratified the Paris Agreement. Instantly, that meant that the existing target – of 80% reduction in emissions by 2050, adopted in 2008 as part of the Climate Change Act –  came under intense scrutiny. To keep to its share of a global carbon budget, the UK’s ambition would have to be higher, and a “net zero” by 2050 target was advocated by many. This meant that industries which had previously thought themselves able to be in the 20% of “allowed” emission post-2050, had to start looking more intently at their own emissions. Energy efficiencies and changes to processes could only reduce by so much (and at escalating cost). A “system-wide” solution for capturing emissions from a variety of sources was -so the argument, went – going to be needed.

(Other previously international pressures were less clear. The EU was still licking its wounds after the failure of the “NER300” scheme to fund the much-vaunted 15 CCS projects, announced in 2009. The US, now looking intently at CCS under Joe Biden, was under the control of the Trump administration, hostile to any climate initiatives whatsoever).

Nationally, the Brexit referendum meant not only would the UK have to re-examine its climate policies (e.g. exit from the EU Emissions Trading Scheme), but there was a change of perspective within the Conservative Party to major government spending in support of industrial growth.  Under new Prime Minister Theresa May, the idea of “industrial strategy” was back on the agenda (she made much of this during her Conservative Party election bid.)  Two departments – DECC and BIS – which had previously looked at CCS for industrial decarbonisation, were brought together as “Business, Energy and Industrial Strategy” (BEIS).

The question of how UK industry could innovate and sustain itself as part of a “Green Industrial Revolution” began to pre-occupy policy makers.

Amidst all this, the proponents of CCS – including industry, academics and sympathetic civil servants and politicians – worked hard to combat the argument that CCS was prohibitively expensive and would only “work” for energy generators.  They kept up a constant tempo of reports, conferences and lobbying. Alongside arguments for a “hydrogen economy” (CCS would be needed to capture emissions from creating hydrogen from methane), the main argument they deployed was around saving industries and jobs in the “industrial heartlands” – especially on the East Coast of England.  It did not hurt that a Conservative, Ben Houchen, became Mayor of the traditionally Labour area of Teesside in 2017. He amplified the arguments of groups like the Teesside Collective that CCS was affordable and necessary.

As one interviewee put it to us

“As MPs are passing through the lobby, we need people to ask questions to their MP, “what about our CCS project?” And so it becomes much more locally-owned and supported amongst a diversity of people, rather than the few relatively remote technology advocates.”

Regardless of the hard work, the CCS lobby needed luck. And it got this the arrival of Claire Perry at BEIS as a minister. She and civil servants launched a “Clean Growth Strategy” in October 2017. This strategy was cautiously enthusiastic about CCS (cost flagged as a major factor!). More significantly, she established a “Cost Challenge Taskforce” (The more obvious title “cost reduction” had already been used in 2013!).  This taskforce brought together industry and civil servants which is regarded by our interviewees as the crucial moment of collaboration where details were hashed out, and the idea of industrial clusters” really took shape.  (Not everyone looks favourably on the Taskforce – for a view that it represents naked capture of the policymaking process, see this article by Nafeez Ahmed).

There was no single factor that brought CCS back.  Its return was not inevitable, but instead we can see it as an example of the importance of dedicated and persistent champions who did a variety of things. They

• Worked assiduously to argue that the price would not be as high as the gloomiest predictions
• Built a much bigger network of advocates (especially regionally)
• Used the venues that were available to help “co-curate” policy development
• Tied the technology to a narrative of industrial growth and innovation, and regional economic development and jobs.
• Tied the technology to the renewed enthusiasm for hydrogen

---

How it is different this time?

So, CCS is back on the agenda.  It is no longer about single (energy) point-sources of carbon dioxide connected to a storage facility by a single pipeline. Instead the vision is of multiple sites (energy and industry) making use of a system of pipes leading to a variety of storage facilities, with scope – potentially  – for “greenhouse gas removal.”  Will it work at the speed and scale it needs to? Will the idea of clusters decarbonising continue to be promulgated CCS is NOT delivered? Time will tell. Is CCS, on its own, enough? Definitely not.  The UK (and the world) faces enormous challenges that a “techno-fix” – no matter how compelling and seductive, supported by powerful actors, will not be adequate to the challenges ahead.

Disclaimer: The views and opinions expressed in this blog are those of the authors alone and do not necessarily represent the opinions of the University of Sussex, the Sussex Energy Group as a whole, IDRIC, or any of its partners.

Follow Sussex Energy Group