Factory
Getty Images

The Conservative government has put 190,000 jobs at risk by cutting a £1bn carbon-capture programme, despite warnings from industry that the move would have wide-ranging and costly consequences.

Former Prime Minister David Cameron and George Osborne, then Chancellor of the Exchequer, went ahead and terminated the cash fund just weeks after receiving the industry warnings. The money would have created 30,000 jobs and helped protect 160,000 others in the UK's manufacturing industries, industry figures said.

Letters from an industry group, dated 2 November 2015, were sent to the Prime Minister's office at No. 10 and George Osborne. Others were sent to Amber Rudd, then Energy and Climate Change Minister; Sajid Javid, former head of Business, Innovation and Skills; and then Cabinet Office policy head Oliver Letwin.

The £1bn fund was earmarked in the 2015 Tory manifesto to kickstart the UK's carbon-capture and storage (CSS) technology industry. The government confirmed the technology is essential for the UK to meet its legally binding carbon targets.

"Developing this industry in the UK could support 15,000 - 30,000 jobs by 2030" as well, wrote Luke Warren, CEO of the Carbon Capture & Storage Association (CCSA), in the letters. The group represents 34 various energy industry players, including BP, Statoil and Shell. Copies of the letters and other correspondence were obtained by IBTimes UK through a Freedom of Information request.

Luke Warren
Internal DECC correspondence sent to the office of then Secretary of State for Energy and Climate Change, Amber Rudd, discussing the letters.

The technology takes carbon emissions from industrial smokestacks and stores them deep underground — significantly reducing the carbon emissions that contribute to climate change.

Applying CCS to energy-intensive industries like power plants, steel, cement and other manufacturing industries "will provide them with a long-term future in which they can flourish... and help to safeguard the 160,000 direct jobs and many more indirect jobs in these sectors," CCSA's Warren wrote. In 2014 the UK's Department of Energy and Climate Change confirmed the technology "could support 15,000 - 30,000 jobs" by 2030.

The UK's plan was to pour the £1bn into a large, commercial power plant fitted with the technology. Shell and power utility Drax had spent hundreds of millions of pounds creating project plans and studies in a competition to win the £1bn fund.

Industries and businesses affected by the cut called it "devastating" and reacted with a mix of "shock" and "uproar."

"It is vital for the future of this technology that funding for the CCS Commercialisation Programme is retained," Warren told the Conservatives. Cutting that funding, he warned, would be a "devastating" blow to UK industries and investor confidence and set back the UK's ability to establish the technology "by more than a decade".

That means UK industries would face the "potential risk of 'carbon stranding' of their UK assets and longer term competitive disadvantage" against the same industries in North America, the Middle East and China, Warren said.

'Short-term affordability over long-term benefits'

The fund was terminated in the UK's autumn spending review on 25 November 2015 — just days before the Paris Climate conference. Last year IBTimes UK revealed how the program's cancellation created a diplomatic embarrassment for Britain during the conference. The move came as a surprise to Britain's international partners, including the US, Canada and China, after the UK promised to help them advance the technology with a commercial-scale project.

Britain ratified the Paris agreement in November 2016, and under the UK Climate Change Act has committed to reduce its carbon emissions by 57% by 2030 and more than 80% by 2050.

If Britain doesn't get the technology up and running, consumers will be paying an extra £1bn to £2bn per year for electricity through the 2020s, according to a September report for the Department for Business, Energy & Industrial Strategy (BEIS). Those costs, it finds, will jump to £4bn to £5bn per year by 2040.

Before cutting the £1bn CCS kickstarter, Osborne and his Treasury team didn't provide calculations of "the cost of delaying large-scale deployment of the technology", the UK's National Audit Office (NAO) found last July.

That meant that the risks of cancelling the fund "were not factored into the decision", said another report in November. It found that the Treasury "favours short-term affordability over long-term benefits" and that "a number of Treasury's decisions could lead to higher costs to the economy in the future." The £1bn CCS fund "was a case in point".

osborne cameron
George Osborne and David CameronGetty

The September BEIS report said "there is no justification for delay" on moving forward with CCS technology. "Heavy costs will be imposed on current and future UK consumers by a continued failure to enact an effective CCS policy," it said. The report found developing the technology "would provide jobs and economic stimulus in parts of the country where they are most needed".

Yet a spokesperson for BEIS said the government has "been clear that the costs of carbon capture and storage must come down if it is to play a part in reducing the UK's carbon emissions". When asked about future plans for the technology, they said BEIS is "considering the options for CCS in the UK and will set out our approach in due course".

At present, the UK government is using small pots of money here and there for R&D and studies as "political cover to say that they're doing something on CCS", a source close to the energy industry told IBTimes UK.

A full Audit Office review of the cost to British taxpayers and industries of the fund cancellation has been delayed multiple times since the autumn of 2016, and is now expected in early 2017.