Carbon Capture Report

HC 742
Published on 21 May 2014

by authority of the House of Commons
London: The Stationery Office Limited
0.00

House of Commons
Energy and Climate Change
Committee
Carbon capture and
storage
Ninth Report of Session 201314
Report, together with formal minutes relating
to the report
Ordered by the House of Commons
to be printed 13 May 2014

The Energy and Climate Change Committee
The Energy and Climate Change Committee is appointed by the House of
Commons to examine the expenditure, administration, and policy of the
Department of Energy and Climate Change and associated public bodies.
Current membership
Mr Tim Yeo MP (Conservative, South Suffolk) (Chair)
Dan Byles MP (Conservative, North Warwickshire)
Ian Lavery MP (Labour, Wansbeck)
Dr Phillip Lee MP (Conservative, Bracknell)
Rt Hon Mr Peter Lilley MP (Conservative, Hitchin and Harpenden)
Albert Owen MP (Labour, Ynys Mn)
Christopher Pincher MP (Conservative, Tamworth)
John Robertson MP (Labour, Glasgow North West)
Sir Robert Smith MP (Liberal Democrat, West Aberdeenshire and Kincardine)
Graham Stringer MP (Labour, Blackley and Broughton)
Dr Alan Whitehead MP (Labour, Southampton Test)
Powers
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which are set out in House of Commons Standing Orders, principally in SO No
152. These are available on the internet via www.parliament.uk.
Publication
Committee reports are published on the Committees website at
www.parliament.uk/ecc and by The Stationary Office by Order of the House.
Evidence relating to this report is published on the Committees website at
www.parliament.uk/ecc
Committee staff
The current staff of the Committee are Farrah Bhatti (Clerk), Vinay Talwar
(Second Clerk), Tom Leveridge (Committee Specialist), Marion Ferrat (Committee
Specialist), Shane Pathmanathan (Senior Committee Assistant), Amy Vistuer
(Committee Support Assistant), and Nick Davies (Media Officer).
Contacts
All correspondence should be addressed to the Clerk of the Energy and Climate
Change Committee, House of Commons, 14 Tothill Street, London SW1H 9NB.
The telephone number for general enquiries is 020 7219 2569; the Committees
email address is ecc@parliament.uk
Carbon Capture and Storage 1

Contents
Report Page
Summary 3
1 Introduction 5
What is carbon capture, transport and storage? 7
Government support for CCS 8
Global progress on CCS 11
2 Deploying CCS in the UK 13
Benefits of CCS 13
The cost of deploying CCS 15
Political risk 17
Financial support 17
Clustering and common infrastructure 21
Enhanced Oil Recovery 24
Industrial CCS 25
Safety and reputational risks 26
Regulatory risk 30
Scientific and engineering challenges 31
First mover advantage 34
3 Conclusion 36
Conclusions and recommendations 38
Annex 42
Canada programme and visit notes 42

Formal Minutes 58
Witnesses 59
Published written evidence 60
List of Reports from the Committee during the current Parliament 62


Summary
Carbon capture and storage (CCS) has the potential to help keep carbon emissions within
the limits that are needed to avoid dangerous global temperature rises. As such, it could be
a game changer in efforts to tackle climate change, but high energy and financial costs
currently make CCS uneconomic without specific policy interventions to support it. These
are likely to be subsidies from the public purse and/or the consumer. As a result, progress
on CCS has been extraordinarily slow with only a handful of projects in operation around
the globe and none fitted to power stations at full scale. In the UK the expected start date
has been repeatedly pushed back from 2014 to potentially after 2020. This delay has called
into question the credibility of Government CCS policy and has resulted in a lost decade
for this vital fledgling industry.
To ensure CCS can start helping us cut power sector emissions by the 2020s, the
Government needs to prioritise designing a credible financial incentive framework using
guaranteed-price Contracts for Difference (CfD) and commit to a realistic but ambitious
timeline for awarding support to projects both inside and outside its CCS
commercialisation competition. Viable projects outside the competition, in particular,
could be at risk of collapsing unless they get a clear signal from Government that they can
negotiate for a CfD in parallel with competition projects. CfDs need to be tailored for all
these projects to suit the unique characteristics of CCS.
Getting the first CCS projects built will be key to reducing the cost of future CCS projects.
It is unclear whether any financial advantage accrues to first movers, so there is a case for
limiting the amount of consumer support which is allocated to the first CCS projects. It is
likely that most benefits will be accrued by second movers, which may explain why the big
companies are reluctant to spend so much of their own money at this early stage of CCS
development. It would be wise for the Government to direct its resources at the uniquely
British aspects of CCS deployment. This includes, promoting clustering of projects,
encouraging enhanced oil recovery and reducing the regulatory and technical barriers
associated with storing CO
2
underground. With the right regulatory approach, it could one
day be feasible to create a storage market where other countries pay to permanently store
CO
2
in the UKs disused offshore geological sites.
The UK has previously experienced significant opposition to new energy infrastructure
such as coal plant, wind farms and shale drilling. In some instances this has been driven by
misinformation and misunderstanding. A national CCS engagement strategy emphasising
the potential benefits, dispelling myths and listening and responding to public concerns
over safety would help to address public opposition to CCS and to try and prevent it from
growing.
To increase the chance that the first CCS project will be operational in the UK by 2020 the
Government should aim to reach final investment decisions with the two projects left in its
competition by 2015. Too much time has already been wasted by badly designed
bureaucratic policies. CCS technology could be vital to keep climate change within
4 Carbon Capture and Storage

manageable bounds, there is no further time to lose.

1 IPCC, Summary for Policy Makers, Climate Change 2013: The Physical Science Basis (2013), p27
2 Uncertainty range: 445 to 585 GtC
3 1,000 gigatons of carbon (GtC) represents the amount of carbon that can be emitted for it to remain likely (66%
chance) that global temperatures do not rise by more than 2C (relative to pre-industrial times)
4 IEA, World Energy Outlook (2012), p259
5 IPCC, Special Report on Carbon Dioxide Capture and Storage (2005), p12
1 gigatonne of carbon (GtC) is equal to 1,000,000,000 metric tonnes
515GtC,
1,2
already
emitted
Global Carbon Budget
1000GtC
1,3
Potential emissions from
remaining fossil fuel
reserves amount to
780GtC
4
Technical
potential of at least
545GtC
of geological storage
5
CCS
capture and storage in keeping
carbon emissions within
the global carbon budget

1 Introduction
1. The latest assessment of climate science published by the Intergovernmental Panel on
Climate Change (IPCC) concluded that, it is extremely likely that human influence has
been the dominant cause of the observed warming since the mid-20th century.
1
It is
estimated that for it to remain likely
2
that global temperatures do not rise by more than
2C (relative to pre-industrial times) the maximum carbon that can be released into the
atmosphere is 1,000 gigatonnes of carbon (GtC) (3670 GtCO
2
).
3
This is sometimes referred
to as the global carbon budget. Between the start of the industrial revolution and 2011, 515
GtC (1890 GtCO
2
) have been emitted to the atmosphere (roughly half the carbon budget),
mainly as a result of burning fossil fuels.
4
According to the International Energy Agency
(IEA) total potential emissions from fossil fuel reserves in 2012 amount to 780 GtC (2,860
GtCO
2
).
5
As a result, there is more CO
2
locked up in fossil fuels than can safely be emitted
to stay within the global carbon budget. The IEA argued that without a significant
deployment of carbon capture and storage (CCS) a substantial proportion of current
proven fossil-fuel reserves cannot be commercialised in a 2C world before 2050.
2. CCS enables CO
2
emitted from large sources to be permanently stored instead of
released into the atmosphere. It is one of the only technologies available that has the
potential to turn high carbon fossil fuels into genuinely low carbon sources of energy.
There is also potentially significant storage available. In 2005, the IPCC estimated, for
example, that there could be a technical potential of at least about 545 GtC (2,000 GtCO
2
)
of storage capacity in geological formations globally.
6
Without CCS there is a risk that the
CO
2
locked in the remaining fossil fuels reserves will be released to the atmosphere.
3. The UK is well suited to take advantage of CCS and it could bring several benefits.
Support for CCS is found at the highest levels of Government with the Prime Minister
repeatedly emphasising the importance of CCS to meeting future climate change targets.
7

Despite this, progress on CCS in the UK has been frustratingly slow. We have an ongoing
interest in the deployment of CCS because of its potential to help the UK meet its energy
and climate change policy goals. It is an issue we have regularly touched on in oral evidence
sessions and in past reports, as set out below.
4. In our 2011, report, The UKs Energy Supply: Security or Independence?, we concluded
that if CCS was not commercially viable by 2020 that the UK could face an energy

1 Human influence on climate clear, IPCC report says, Intergovernmental Panel on Climate Change press release 2013/20/PR, 27
September 2013
2 Likely means a 66% chance
3 Intergovernmental Panel on Climate Change, Summary for Policy Makers, Climate Change 2013: The Physical Science Basis (2013),
p27
4 As above, Uncertainty range: 445 to 585 GtC (1630 to 2150 GtCO
2
)
5 International Energy Agency, World Energy Outlook (2012), p259
6 Intergovernmental Panel on Climate Change, Special Report on Carbon Dioxide Capture and Storage (2005), p12
7 Oral evidence taken before the Liaison Committee on 14 January 2014, HC (2013-14) HC 939, Q45 and Oral evidence taken before the
Liaison Committee on 11 December 2012, HC (2012-13) 484-ii, Qq36-37

dilemma: either provide energy security but exceed carbon budgets by running new
unabated fossil fuel plant; or, meet climate change obligations but risk energy security by
shutting down (or using only very sparingly) unabated fossil fuel plant. We recommended
that the Government should draw up plans for how the tension between climate and
security goals would be dealt with if carbon capture and storage was not delivered by 2020.
8

The Government said it remained confident it would achieve its ambition for commercial
deployment of CCS by the 2020s. It was content for fossil fuels with CCS to compete with
other low-carbon and renewable generation. The challenge was to reduce the cost of CCS
so that it could compete alongside these other forms of generation.
9

5. In our 2013 report, The Impact of Shale Gas on Energy Markets, we highlighted our
frustration at how long it was taking to develop CCS and establish whether it could play a
meaningful role in the UKs energy mix. We recommended that the Government needed
to conclude its CCS competition as soon as possible and bring forward CCS demonstration
projects to allow it to be deployed in time to contribute towards meeting UK carbon
budgets.
10
The Government responded saying that it had been working at pace to
progress its competition. It argued the merits of the detailed process it had gone through
which had brought much value by ensuring the projects that had been chosen would be
deliverable and financeable and would provide good value for money for the UK tax payer.
The Government suggested that final investment decisions (FID) would take place in early
2015, and that the projects were expected to be operational between 2016 and 2020.
11

6. Frustrated by the Governments response to our recommendations we decided to look
into CCS in more detail. We launched our inquiry in July 2013. The terms of reference can
be found online.
12
We received 35 submissions of written evidence and held three oral
evidence sessions, one of which was held at Sheffield University. We heard from many of
the businesses and consortia seeking to develop full-scale CCS projects in the UK. A full list
of witnesses can be found at the back of this report. As part of the inquiry we visited
Imperial College and UK CCS Research Centres Pilot-Scale Advanced CO
2
-Capture
Technology (PACT) facilities in the UK. We also visited two CCS projects in Canada and
met a range of stakeholders. Details of this visit can be found in the Annex. We are
extremely grateful to all those who gave evidence to this inquiry and especially to all those
who gave up their time to speak to us on our visit to Canada.
7. In the rest of this chapter we look at what CCS is, its potential applications, what the
Government has been doing on CCS up until now and what progress has been made

8 Energy and Climate Change Committee, Eighth Report of Session 201012, The UKs Energy Supply: Security or Independence?, HC
1065, para 12-15
9 Energy and Climate Change Committee, Tenth Special Report of Session 201012, The UKs Energy Supply: Security or Independence?
Government Response to the Committee's Eighth Report of Session 2010-12, HC 1813, para 20-21
10 Energy and Climate Change Committee, Seventh Report of Session 201213, The Impact of Shale Gas on Energy Markets, HC 785,
para 81
11 Energy and Climate Change Committee, Third Special Report of Session 201314, The Impact of Shale Gas on Energy Markets:
Government Response to the Committee's Seventh Report of Session 201213, HC 609, para 16
12 Energy and Climate Change Committee, Call for evidence on Carbon Capture and Storage, 17 July 2013

internationally. In the next chapter we explore the benefits of CCS in the UK, the costs, and
the barriers to deployment and how they can be overcome.
What is carbon capture, transport and storage?
8. CCS is a new and immature field.
13
It can be applied to fossil fuel power plants and
industrial sectors. Much of the focus in the UK and the rest of the world has been on
demonstrating full chain CCS on fossil fuel plants first.
14
Even though each element of the
chain uses proven technologies that have been demonstrated independently in different
industries, a full chain CCS project has yet to be demonstrated in the power sector
(although some are in advanced construction).
15

9. CCS is the only large-scale mitigation option available to make deep reductions in the
emissions from industrial sectors such as cement, iron and steel, chemicals and refining.
16

A number of sectors (e.g. gas processing and ammonia production) already separate and
capture CO
2
as part of the industrial process. Other sectors, however, (e.g. cement, iron and
steel) need to develop carbon capture technologies further before they can be deployed at a
commercial scale.
17

10. Carbon capture technology is able to reduce CO
2
emissions to the atmosphere by
approximately 8090% when applied to a power plant.
18
There are three main capture
technologies ready for application and proposed for early CCS projects in the UK. Post-
combustion capture (PCC) technology is proposed at the Peterhead combined cycle gas
turbine (CCGT) retrofit project in Scotland.
19
Oxy-fuel combustion technology is proposed
for the White Rose project at Drax in Yorkshire.
20
Pre-combustion technology is proposed
by three other UK projects: the Don Valley CCS project, Teesside Low Carbon Project and
the Captain Clean Energy Project.
21
Further information about these carbon capture
technologies can be found in the 2009 Parliamentary POSTnote on CO
2
Capture,
Transport and Storage.
22

11. New carbon capture technologies are also being invented. This includes, for example,
membrane technologies, porous materials that operate by selectively allowing CO
2
to
permeate through the membrane material separating it from other components of a gas

13 Q87 [Mr Hodrien]
14 Q36
15 Engineering the Future (CCS 032), DECC (CCS 042), International Energy Agency (CCS 043)
16 Energy Technologies Institute (CCS 012), Jon Gibbins and Hannah Chalmers (CCS 038), International Energy Agency (CCS 043)
17 Carbon Capture and Storage Association (CCS 027)
18 UK Advanced Power Generation Technology Forum (CCS 011), Oil & Gas UK (CCS 021), Grantham Research Institute, LSE (CCS 028),
Engineering the Future (CCS 032), Rodney John Allam (CCS 034), Capture Power (CCS 037), DECC (CCS 042)
19 Shell International (CCS 017)
20 Capture Power (CCS 037)
21 UK Advanced Power Generation Technology Forum (CCS 011), 2Co Energy (CCS 035), CO2DeepStore (CCS 039)
22 CO
2
Capture, Transport and Storage, POSTnote 335, Parliamentary Office of Science and Technology, June 2009

stream; chemical looping, a variation on oxy-combustion capture technology; carbonate
slurry and technologies to decarbonise the gas grid.
23

12. We were particularly impressed with the radical technology outlined by Mr Allam,
Technical Director of NET Power which if successful could have a potentially profound
effect on the energy industry.
24
The NET Power cycle burns fossil fuels in pure oxygen and
uses the resultant CO
2
as a working fluid to drive turbines rather than steam.
25
As such,
carbon capture becomes an inherent feature of the process with no additional capture
technology required because CO
2
is produced naturally as a by-product.
26
Mr Allam
explained that his system could produce electricity at a lower cost that any existing fossil
fuel based power system.
27
He also reported that the Government had been very supportive
of the technology.
28

13. In the UK it is considered technically and economically preferable to transport the
captured CO
2
by pipeline to be stored in the North Sea.
29
Compression and transport of
CO
2
are relatively mature technologies. They have been used in North America for over 40
years for enhanced oil recovery (EOR or Enhanced Gas Recovery). EOR involves injecting
CO
2
into depleted reservoirs to assist in extracting some of the remaining oil or gas (see
paragraph 44 for more discussion of enhanced oil recovery).
30

14. CO
2
can be stored onshore or offshore. In the UK, it is likely that offshore geological
storage in depleted oil and gas reservoirs and saline aquiferswill be the first large-scale
option for CCS development at scales able to meet global climate change emissions
reductions targets.
31
Long-term storage is less well developed than transport technologies
with only a small number of reference sites in Norway, South East Australia, Algeria, and
Canada.
32
Much of the storage to date has been used for EOR.
33
The sale of CO
2
for EOR
(prices in the US range from $15-30 per tonne) has also helped CCS by reducing the cost of
demonstration projects.
34
Unlike North America, EOR in the UK would be offshore.
Government support for CCS
15. Successive governments made efforts to provide capital support to a large-scale full
chain CCS project for the best part of a decade (see table 1).
35
The first competition,

23 Q93 [Mr Hodrien], Research Councils UK (CCS 006), Shell International (CCS 017), Tony Day (CCS 041)
24 Q99
25 Q85 [Mr Allam],
26 Q88
27 Qq85 [Mr Allam], 88, Rodney John Allam (CCS 034)
28 Qq99-100
29 International Energy Agency (CCS 043)
30 Energy Technologies Institute (CCS 012), Engineering the Future (CCS 032), International Energy Agency (CCS 043)
31 Research Councils UK (CCS 006), Geological Society (CCS 040)
32 Engineering the Future (CCS 032)
33 UK Advanced Power Generation Technology Forum (CCS 011), Shell International (CCS 017), Engineering the Future (CCS 032)
34 Energy Technologies Institute (CCS 012), Grantham Research Institute (CCS 028), E3G (CCS 033)
35 Qq26-27 [Professor Haszeldine]

announced in 2007, was expected to deliver an operating CCS project by 2014. The
competition ran for four years until 2011 when the Government ended negotiations with
the last remaining bidder. The Government pulled out because it decided it could not fund
the project within its agreed 1 billion capital limit. The National Audit Office (NAO)
published a report in 2012 examining how the Department for Energy and Climate Change
(DECC) and its predecessor, Department for Business, Enterprise and Regulatory Reform
(BERR) managed the competition. The NAO highlighted numerous shortfalls in both
departments throughout the competition.
36
The second competition (termed the CCS
Commercialisation Programme) was announced in 2012. Front End Engineering Design
(FEED)
37
contracts were awarded to two preferred bidders in 2013 and 2014. The two
preferred bidders were Capture Power Limited and its White Rose project in Yorkshire
and Shell and SSE and their Peterhead project in Aberdeenshire. The Government hopes
these two projects will be operational some time in 20162020.
Table 1: Timeline of UK CCS competitions
Year Announcement/decision
2007 Competition to fund the UKs first CCS demonstration project launched by Government.
Contract award was scheduled for 2009, with the expectation that the project would
operate from 2014.
2010 Front-end engineering and design (FEED) contracts awarded to E.ON (Kingsnorth project
in Kent) and ScottishPower (Longannet project in Fife) consortiums.
Government announces 1 billion will be made available to support CCS projects.
E.ON withdraws from the competition.
2011 The Government announces that CCS money for CCS demonstration projects would come
from general taxation rather than a CCS levy.
Negotiations with ScottishPower consortium terminated by Government.
2012 The National Audit Office (NAO) published a report criticising the competition.
New competition for CCS demonstration projects announced along with a CCS Roadmap.
Contract award was scheduled for early 2015, with the expectation that the projects
would operate by 20162020.
2013 FEED contracts awarded to Capture Power Limited (White Rose project in Yorkshire).
2014 FEED contract awarded to Shell and SSE (Peterhead project in Aberdeenshire).
Source: compiled from the House of Commons Standard Note on Carbon Capture and Storage
38
and
the National Audit Office Report on Carbon Capture and Storage
39
.

16. Alongside the second competition, the Government launched a CCS Roadmap which
set out, what it described as, a comprehensive package of financial and regulatory
support which the Government believes is one of the most attractive CCS offerings in the
world. The main components of the CCS Roadmap include:
The CCS Commercialisation Programme (the competition) with 1 billion in capital
funding and additional operational support available through Contracts for Difference
(CfD) to support the initial stages of commercialisation.

36 National Audit Office, Carbon capture and storage: lessons from the competition for the first UK demonstration, HC (2010-2012) 1829
37 FEED stands for Front End Engineering Design. The FEED is basic engineering which comes after the Conceptual design or Feasibility
study. The FEED design focuses the technical requirements as well as rough investment cost for the project. The FEED can be divided
into separate packages covering different portions of the project. The FEED package is used as the basis for bidding the Execution
Phase Contracts (EPC, EPCI, etc) and is used as the design basis.
38 Carbon capture and storage, Standard Note SN05086, House of Commons Library, March 2014
39 National Audit Office, Carbon capture and storage: lessons from the competition for the first UK demonstration, HC (2010-2012) 1829

A 125 million, 4-year, co-ordinated research and development (R&D) and innovation
programme and a new UK CCS Research Centre.
Development of a market for low carbon electricity through Electricity Market Reform,
including availability of Feed-in Tariff CfD for low carbon electricity to bring forward
investment in CCS beyond the initial projects.
Commitments to working with industry to address other important areas including
developing the CCS supply chain, storage and assisting the development of CCS
infrastructure.
International engagement focused on sharing knowledge generated through the UK
programme and learning from other projects around the world.
40

17. In the CCS Roadmap the Government asked industry to set up a CCS Cost Reduction
Task Force. This was to work alongside the Departments Office of CCS (OCCS) to set out
a path and action to reduce the costs of CCS. The Task Force published its findings (and
then disbanded) in 2013 confirming that fossil fuel power generation with CCS will have
the potential to compete cost effectively with other low-carbon forms of energy generation
in the 2020s. It set out its recommendations on how to achieve cost reductions and develop
the CCS industry in the UK. It also recommended that national leadership groups be
created to take forward the recommendations. These included, the UK CO
2
Storage
Development Group, the UK CCS Commercial Development Group and the UK CCS
Knowledge Transfer Network.
41
These groups were set up and taken forward by specific
companies and organisations. The UK CO
2
Storage Development Group, for example, was
set up by the Crown Estate. Later in 2013 the Government provided an update on key
policy developments since the publication of its CCS Roadmap, responded to the Task
Forces major recommendations, and said it would engage closely with the leadership
groups. The Government also decided to re-launch the CCS Development Forum (it
originally met from 20102012), co-chaired by the Energy Minister, Michael Fallon, and
Michael Gibbons OBE, Chair of the Carbon Capture and Storage Association (CCSA)
which aims to accelerate commercial deployment.
42

18. Since the publication of the CCS Roadmap and the launch of the second competition
the Government has aimed to deliver first of a kind demonstration projects as well as a
strong and successful CCS industry.
43
Despite this activity, representatives from industry
and academia expressed their frustration at how long it was taking the Government to
award money to the first CCS demonstration projects and therefore kick start a CCS
industry in the UK.
44
This has made some in the industry frustrated and weary calling into

40 DECC (CCS 042)
41 CCS Cost Reduction Task Force, The Potential for Reducing the Costs of CCS in the UK: Final Report (May 2013)
42 DECC, CCS in the UK: Government response to the CCS Cost Reduction Task Force (October 2013)
43 DECC (CCS 042)
44 Qq6 [Professor Haszeldine], 7 [Mr Warren, Professor Haszeldine], 26 [Professor Haszeldine], 31, 54, Scottish Carbon Capture and
Storage (CCS 024), Grantham Research Institute, LSE (CCS 028); 2Co Energy (CCS 035)

question the Governments commitment to CCS.
45
E3G, for example, stated that the
competition process is, too slow, and the current approach is a recipe for the period 2010
2015 being seen to be five wasted years for CCS in the UK.
46
This is something we have
previously raised concerns about (see paragraph 5). The Minister of State for Energy,
Michael Fallon, assured us that the Government was, pressing ahead with CCS as fast as
we can.
47

19. The expected start date of CCS has been pushed back from 2014 to potentially after
2020. Given the widespread acknowledgement of the importance of CCS to meeting
future climate change targets this lost decade is extremely disappointing. While we take
note of recent efforts by Government to work more closely with industry to accelerate
CCS deployment, it is essential that the Government is able to commit to a realistic but
ambitious timeline for taking final investment decisions. The rest of this report will
look at what more the Government needs to do to accelerate CCS deployment and
support a wider CCS industry.
Global progress on CCS
20. There is expected to be a strong global demand for CCS. The International Energy
Agency (IEA) estimates that CCS could contribute towards one sixth of CO
2
emissions
reductions required by 2050.
48
Presently, however, there is very little CCS activity taking
place around the world. While the CCS Global Institute has recently reported that the
number of CCS projects is increasing, there were only 21 CCS projects around the globe in
operation or under construction as of February 2014.
49
In addition, as previously
mentioned, CCS has not been demonstrated on power generation at scale to date anywhere
in the world. Some countries are, however, more advanced in terms of deploying CCS than
others with practical progress being made in the US, China and Canada.
21. According to Scottish Carbon Capture and Storage (SCCS) the US has been most
successful in progressing CCS from concept through research to commercial reality. The
US Department of Energy had a multi-year strategic plan which involved basic research,
small- and full-scale projects and proved to be effective. China is also expected to make
rapid progress on CCS in the next few years. In April 2013, the Chinese Central
Government requested, as part of its next five-year plan, that all provinces make plans for
CCS enactment.
50

22. Canada has also been successful in bringing forwards CCS. The Provinces of Alberta,
Saskatchewan and British Columbia have all enacted targeted carbon taxes. The Federal
Government has proposed an emissions performance standard on coal-fired plant. This

45 Q13 [Professor Haszeldine], 2Co Energy (CCS 035)
46 E3G (CCS 033)
47 Q5
48 DECC (CCS 042)
49 Global CCS Institute, The Global Status of CCS (February 2014), p3
50 Scottish Carbon Capture and Storage (CCS 024)

will come into effect on 1
st
July 2015. We visited two projects; Shells Quest project in
Alberta and SaskPowers Boundary Dam project in Saskatchewan (expected to be the
worlds first full-chain CCS project). We were struck by the simple but effective financial
incentives implemented in Canada. The projects had been enabled by company
partnerships with very large, and timely, provincial funding, with some federal support.
The SCCS said:
The Canadian experience has been marked by a willingness to make sure that
agreements are reached; with state-owned utilities and private companies
both displaying a willingness to invest due to the need to reduce emissions to
maintain operations.
51

We were concerned to see, however, that the two projects seemed to be a result of past
policy decisions. The absence of continued support was demonstrated by the absence of
future projects across the whole of Canada.
23. The Crown Estate told us that there were no obvious crossovers between the UK and
other countries because the drivers for delivery were very different. Support tended to be
provided in the form of grants and loan guarantees to projects using EOR.
52
If there are
lessons to be learned, it is important that the UK is in a position to do so. We are pleased to
see that the Government is taking a proactive approach to this by participating in a number
of international initiatives such as the Carbon Sequestration Leadership Forum, the North
Sea Basin Task Force, the Clean Energy Ministerial and the 4 Kingdoms CCS Initiative.
53

We also note that the Government has facilitated collaboration with SaskPowers Boundary
Dam project in Canada.
54

52 The Crown Estate (CCS 019)
53 DECC (CCS 042)
54 Q119 [Mr Fallon]

2 Deploying CCS in the UK
24. SCCS described how the UK has the best combination of geological, engineering,
industrial and academic capabilities in the whole of Europe, together with a stated policy
commitment to reduce CO
2
emissions and the foundational legislative framework required
for CO
2
storage. As a result the UK has succeeded in attracting over 50% of the proposals
for CCS projects in Europe.
55

Benefits of CCS
25. The key benefit of deploying CCS in the UK would be:
CCS could be a key technology to help decarbonise the UKs power and industrial
sectors which are, and will continue to be, heavily reliant on fossil fuels.
56
Fossil fuel
power plant fitted with CCS could meet between 12% and 37% of total electricity
demand in 2050.
57
The Energy Technologies Institute (ETI) estimated that deploying
CCS could reduce the cost of meeting UK carbon targets by 3040 billion or up to 1%
of Gross Domestic Product (GDP) by 2050 (by avoiding spending on more expensive
alternatives for cutting emissions).
58
The CCSA and the Trades Union Congress (TUC)
believe deployment of CCS could result in a 15% reduction in the wholesale price of
electricity (compared with scenarios in which CCS is not deployed) (see figure 1) and
lowering household bills by 82 per year compared with what they otherwise would
be.
59
These projections rely on broad-brush assumptions about the cost of alternative
technologies in the future, which are very uncertain.
CCS could provide wider economic benefits. A 2009 study by the Industrial and Power
Association (IPA), for example, found that based on the IEA CCS roll-out
programme and a 10% global market share for UK companies the UK plc share of
the global CCS business was potentially worth more than 10-14 billion per year from
around 2025, with the added value in the UK worth 59.5 billion per year.
60
More
recently, the CCSA/TUC concluded that the Gross Value Added (GVA) benefits from
CCS deployment in the UK would be in the region of 2-4 billion per year by 2030.
They suggested that each UK CCS power sector project could deliver between 150
200 million per year in GVA benefits over the lifetime of the project as well as creating
between 1,0002,500 jobs during plant construction and 200-300 jobs in operation and
maintenance and the associated supply chain.
61

55 Scottish Carbon Capture and Storage (CCS 024), Capture Power (CCS 037)
56 Q1 [Mr Warren, Professor Haszeldine]
57 Grantham Research Institute, LSE (CCS 028)
58 Energy Technologies Institute (CCS 012), Capture Power (CCS 037), DECC (CCS 042)
60 UK Advanced Power Generation Technology Forum (CCS 011)

Figure 1: Wholesale electricity prices to 2030 under four scenarios

Source: Carbon Capture and Storage Association (CCS 047)

CCS could open up the potential to utilise the UKs offshore geological storage capacity
which could amount to ~70 billion tonnes of CO
2
, or put another way, over a century
of UK emissions, or 350 years worth of commercial storage at the present rate of UK
emissions.
62
The Crown Estate has highlighted that in future the North Sea could
become a resource by creating a North Sea storage market whereby permanent
storage of CO
2
could be sold as a service to other European countries.
63

CCS could play an important role retaining existing industries and jobs in the UK.
64
If
the UK is going to meet its ambitious carbon reduction targets, energy intensive

62 Qq2 [Professor Haszeldine], 77 [Dr Neufeld, Professor Gibbins]
63 Q2 [Dr Goldthorpe], The Crown Estate (CCS 019)
64 Association of UK Coal Importers (CCS 020), Oil & Gas UK (CCS 021), Carbon Capture and Storage Association (CCS 047)

industries such as cement and steel will either need to fit CCS or move abroad. The UK
coal mining industry, together with the coal power industry and logistics, for example,
employs several thousand direct and indirect employees.
65
Similarly, the UKs energy
intensive industries have a combined turnover of 95 billion, directly employ 160,000
people with a further indirect employment of 800,000 people via supply chains.
66

Keeping these industries in the UK is a high priority.
The cost of deploying CCS
26. Despite the potential benefits to the UK of deploying CCS, it is very unlikely to become
commercial on its own (unless the CO
2
is sold for EOR). The combination of significant
energy andin the absence of an effective carbon marketfinancial costs make CCS
uneconomic.
67
Engineering the Future stated all of the CCS technologies currently
available would require approximately 2025% more coal or 1015% more natural gas to
be burned to produce the same amount of electricity.
68
Mr Allam of NET Power
highlighted that a power plant with CCS costs 50% to 80% more to generate electricity than
power plant without CCS.
69
The CCS Cost Reduction Taskforces 2013 final report
estimated that the first set of CCS projects may have costs in the range of 150200 per
megawatt hour (roughly three times as expensive as fossil fuel plant without CCS),
70
a
figure largely supported by industry.
71
The main reason for this is the high energy
consumption of powering the CCS equipment, especially the carbon capture stage of the
process.
27. In addition, there are political, regulatory, social and scientific barriers frustrating the
deployment and commercialisation of CCS. This prevents CCS from progressing along the
technology curve to reach full scale deployment, where the cost of a technology reduces as
the technology matures (see figure 2).
72
The CCS Cost Reduction Taskforce concluded that
there was potential for significant cost reductions and for CCS to be cost competitive with
other forms of low carbon power generation at around 100 per megawatt hour by the
early 2020s, and at a cost significantly below 100 per megawatt hour soon thereafter (see
figure 3)depending on when the first CCS projects are actually built (we note that the
2013 date for a final investment decision indicated in the Taskforces report has already
passed).
73
The cost of the three main capture technologies (see paragraph 10) vary and will
influence which technology a developer will choose to deploy. There are also second
generation or novel technologies which could deliver quite significant cost reductions but

66 As above
67 BASF (CCS 001), Tyndall Centre for Climate Change Research, University of Manchester (CCS 013), Engineering the Future (CCS 032)
68 Engineering the Future (CCS 032)
69 Q85
71 Qq5 [Mr Warren] 29 [Ms Paxman, Mr Gomersall, Mr Simon Lewis, Mr Spence]

which were not considered by the Taskforce because of uncertainty around when they
might be commercially available.
74

Figure 2: Technology learning curve

Source: Shell International (CCS 017)

28. The high cost of CCS means that it is likely to develop only in response to specific
policy intervention designed to address the problem of climate change.
75
One of the best
incentives to develop CCS would be a global agreement to tackle climate change.
76
This
could have the additional benefit of incentivising CCS in other countries, thereby reducing
the UKs embedded carbon emissions. The benefits of considering embedded carbon
emissions alongside territorial emissions in the policy-making process were highlighted in
our 2012 report, Consumption-Based Emissions Reporting.
77
Another incentive would be a
strong carbon price which would help to strengthen the case for CCS. However, the
prospect of a global deal is highly uncertain and the carbon price in the EU Emissions
Trading System (ETS) is at present too low to incentivise CCS without additional support.
Below we consider the main barriers (political, safety and reputational, regulatory,
scientific and engineering) frustrating the deployment of CCS and look at how they might
be overcome.

74 Q5 [Mr Warren, Dr Goldthorpe]
75 Qq13 [Littlecott], 64, 66, 75 [Professor Gibbins], Tyndall Centre for Climate Change Research, University of Manchester (CCS 013)
76 Qq64, 66
77 Energy and Climate Change Committee, Twelfth Report of Session 2010-12, Consumption-Based Emissions Reporting, HC 1646, para
39 and 53

Figure 3: CCS Cost Reduction Task Forces cost reduction trajectory

Political risk
Financial support
29. Dr Reiner, Senior Lecturer in Technology Policy at the Judge Business School,
Cambridge University stated that the biggest challenge to deploying CCS in the UK is
credibility of Government policy.
78
A principal concern was that the CCS competition
and its associated FEED
37
studies were too bureaucratic, detailed and slow. SCCS stated, for
example:
Since 2007, commercial CCS projects in the UK have been mired in
government bureaucracy, stifled by immensely detailed and slow
examination of competition proposals. Requirements to tender for funding
support have been more effective at killing off projects and frustrating
international project consortia than they have been at securing investment.
The current commercialisation programme could have secured a pipeline of
projects for the coming decade in pursuit of the stated outcome of cost-
competitive CCS. This is now at risk.
79

30. The consequence has been to repeatedly push back the expected start date of CCS in
the UK.
80
While we are pleased to see that there has been progress made with DECC

78 Q65 [Dr Reiner]
80 Q26 [Professor Haszeldine], Grantham Research Institute, LSE (CCS 028)

successfully awarding both the Peterhead
81
and White Rose
82
projects FEED studies, we
were concerned to hear that there were mixed views among industry as to whether CCS
would be up and running in the UK before 2020. Mr Gomersall, Founding Director of
CO2DeepStore, for example, highlighted that projects usually take about four years to
complete and it might be 2016 before the projects in the competition reach a final
investment decision (FID).
83
The Government was also uncertain when a FID on the two
projects in the competition would be made.
84
This was mainly because of uncertainty over
how long the FEED studies would take to complete. The Minister could not tell us with any
certainty when he expected to reach a FID on the two projects in the competition stating,
it looks unlikely within a year or so, so it could possibly slip to 2016.
85
The Minister was
keen to point out, however, the huge amount of public money involved 1 billion of
public moneyand it is very important to get these projects right.
86

31. As we have heard, delay has called into question the credibility of Government policy
designed to support CCS deployment. It is critical that the Government does not waste
any more time on unnecessarily delaying the start of the first CCS projects. We
recommend that the Government aims to reach final investment decisions (FID) with the
two projects left in the competition by early 2015 (in line with the Governments original
competition timetable). This offers the only hope of making the first CCS projects
operational by 2020. In turn this could help to bring down costs of CCS more quickly and,
therefore, help the development of a wider CCS industry in the UK.
32. With regards to the CCS Roadmap, which aims to look beyond the competition, several
respondents including those from industry thought it lacked pace and scale.
87
There was
also a concern that there was an intentional lack of hard numbers in the Roadmap against
which one could judge progress and hold DECC to account.
88
The industry wanted more
certainty because it was unclear about the level of political support in the medium- to long-
term.
89
Mr Simon-Lewis, Head of Finance at Capture Power said, for example, that
investment institutions, want to see stability of dialogue from Government in relation to
the overall prize.
90
Similarly, Professor Haszeldine, Director of SCCS, argued that CCS
needed more certainty similar to that which had been afforded to both renewables and new
nuclear.
91
The Minister, however, disagreed, questioning the extent to which hard numbers

81 HC Deb, 24 February 2014, col 4WS
82 HC Deb, 9 December 2013, col 2WS
83 Q51
84 Qq51, 52 [Mr Simon-Lewis], 112
85 As above
86 Q112
87 Qq26 [Professor Haszeldine]; 50, 2Co Energy (CCS 035)
88 Q26 [Mr Warren, Professor Haszeldine]
89 Qq21-22, Grantham Research Institute (CCS 028)
90 Q38 [Mr Simon-Lewis]
91 Qq21-22

or hard targets were going to help. He highlighted instead the work taking place as a result
of the CCS Cost Reduction Task Force, EMR reforms and the CCS Development Forum.
92

33. The Government is also intending to provide operational support to CCS projects
through the Governments Contracts for Differences (CfDs). This will be critical to
ensuring the commercial viability of CCS in the absence of a strong carbon price. CfDs
stimulate investment in low-carbon technologies by providing greater certainty of revenue.
This is intended to encourage investment by reducing risks to investors and by making it
easier and cheaper to secure finance. CfDs will also represent an important political gesture
to follow-on projects, which are not eligible for capital funding from the competition, and
help to make them economically viable by providing a route to market.
93
There was a
concern among the industry, however, that CfDs as they have currently been designed
(mainly for other low carbon and renewable technologies) would not be flexible enough to
suit the specific characteristics of CCS.
94
The industry was keen to see more detail on how
the CfD would take account of the cost structure of CCS projects, the variable operating
costs (as a result of fossil fuel inputs) and appropriate sharing of risk and liability.
95
Shell, in
particular, wanted to know more about the allocation process and contract terms.
96
Given
the unique characteristics of CCS it is highly likely that CfDs would need to be adapted. Mr
Simon Lewis at Capture Power told us:
The CfD, for a CCS project, needs to be bespoke. We are seeing a generic
CfD framework at the moment, but one size does not fit all. It will work for
maybe onshore wind, it will work for offshore wind, biomass possibly, but I
think for CCS you need a tailored CfD.
We were pleased that the Minister agreed, stating that, the design of the [CCS] Contract
for Difference will inevitably be somewhat bespoke and could not be considered in the
same way as more mature renewable technologies.
97

34. The Governments Feed-in Tariffs Contracts for Difference (CfD) will be essential for
CCS projects as they will provide operational support as well as a route to market for non-
competition projects. The Government should set out immediately in what ways CCS
CfDs will differ from the more generic CfDs. We recommend that CfDs be tailored to
individual CCS projects because of the unique characteristics of CCS (compared to other
low carbon and renewable technologies). The Government must engage in a dialogue
with industry to ensure that CCS CfDs are designed appropriately.
35. Several follow-on projects, not in the competition told us how important it was to them
to be able to negotiate with DECC for a CfD in parallel with competition projects. If this
occurred it has been speculated that some of the follow-on projects could even be up and

92 Q128
93 CO2DeepStore (CCS 039)
95 Carbon Capture and Storage Association (CCS 027), 2Co Energy (CCS 035)
97 Q129

running at the same time as competition projects.
98
Being forced to negotiate after the
conclusion of the competition, however, could result in those follow-on projects failing to
develop.
99

36. Non-competition projects which do not have the benefit of being eligible for capital
support, but which are still viable projects, are at risk of collapsing unless they get a clear
signal from Government that they can negotiate with DECC for a CfD in parallel with
competition projects. We recommend that as soon as the Government sets out more detail
on the tailed nature of CCS CfDs, the Government should write to the non-competition
projects inviting them to start the process of negotiating for CfD.
37. CfDs are levy-funded schemes whereby the cost is recovered through consumer bills
(rather than funding the schemes directly through general taxation). The Levy Control
Framework (LCF) was established by DECC and HM Treasury in 2011 cap the cost of this
and other schemes (such as the Renewables Obligation (RO) and Feed-in-tariffs (FITs)).
HMT has put a limit on the amounts that can be raised and spent through this mechanism.
The limit for 201314 is set at 3.184 billion, but is set to rise to some 7.6 billion by 2020
21.
100
2Co Energy, Shell, the CCSA, and SCCS expressed concerns that the amount of
funding available for CCS within the LCF is uncertain.
101
Shell wanted to know more about
the long-term budget allocation within the LCF and explained that developing this detail
was imperative to give the industry more clarity and certainty to incentivise investment.
102

2Co Energy argued that details about whether there will be sufficient capacity in the LCF to
support CCS up to 2020 was important for incentivising investmentespecially for those
projects outside the competition.
103

38. CCS will need to be deployed beyond the end of the LCFduring the 2020sif it is to
continue its progress along the technology learning curve and achieve the cost reductions
indicated by the UK CCS Cost Reduction Taskforce. If CfDs are to prove effective in
bringing forward investment for CCS projects beyond the competition the industry needs
visibility on the future of the LCF post-2021. This visibility would accord with the certainty
provided by legislated carbon budgets which cover a similar period. The industry would
likely benefit from an indication over whether the total of the LCF will be maintained in
real terms at 7.6 billion, given that a significant proportion will be taken up by new
nuclear if it goes ahead. This would provide investors with reassurance that CCS (and other
low-carbon technologies) wont be crowded out of the LCF.
39. The CCS industry would benefit from having more clarity on the amount of funding
available for CCS within the Levy Control Framework (LCF) up to 2021. It is also
essential that the industry have visibility on the LCF post-2021. The Government should

98 Q26 [Professor Haszeldine]
99 Q38 [Gomersall], The Crown Estate (CCS 019), 2Co Energy (CCS 035)
100 DECC, Control framework for DECC levy- funded spending: Questions and Answers (December 2011), p4; and DECC, Annex D: Levy
control framework update: extending the framework to 2020/21 (July 2013), p2
101 Scottish Carbon Capture and Storage (CCS 024), Carbon Capture and Storage Association (CCS 027), 2Co Energy (CCS 035)
103 2Co Energy (CCS 035)

set out its thinking on the LCF post-2021 indicating whether the total will be maintained
in real-terms.
Clustering and common infrastructure
40. It is considered desirable to cluster CCS technology so that power and industrial plants
can utilise common transport and storage infrastructurethereby achieving greatest
emissions reductions for the lowest cost. While transport and storage infrastructure is not
the most expensive part of the CCS chain, it does present an opportunity to reduce overall
costs (see figure 3).
104
The CCS Cost Reduction Taskforces analysis highlighted that only
around 25% of cost reductions of CCS power generation over the next 15 years will derive
from reductions in the cost of component technologies. The remaining 75% would result
from reducing the cost of capital by reducing the riskiness of investments and from
increasing the scale and utilisation of CO
2
transport and storage infrastructure.
105
This was
supported by E3G which highlighted that, the major initial cost reductions for CCS
projects will come from inescapably local issues regarding accessibility of CO
2
storage and
the provision of CO
2
transport infrastructure.
106

41. Clustering and sharing infrastructure could also assist the future deployment of
industrial CCS (see paragraphs 48-49)
107
A 2012 study conducted by CO2 Sense showed
that a Yorkshire and Humber CO
2
cluster could have an economic impact totalling 1.255
billion up to 2030; and if long-term economic benefits were also included, total regional
impact could have amounted to over 26 billion by 2050.
108
Other sites which were
considered suitable for clustering have been usefully set out in the Energy Technologies
Institutes (ETI) Optimising the Location of CCS in the UK (see figure 4). Dr Clarke, CEO of
the ETI argued that it was important to consider carefully where the optimum sites would
be, how these sites could then be linked and how appropriate support and business model
development could be provided to facilitate clustering.
109

42. We were pleased to see that the pipeline for the proposed White Rose project (a
preferred bidder in the current competition) would be built with capacity for additional
CCS projects in the area.
110
The CCSA was concerned, however, that CfDs in their current
form, will not support investment in common infrastructure as it is designed to support
decarbonised electricity and not additional infrastructure capacity.
111
The Crown Estate
said that support, in addition to CfDs, to deliver commercial transport and storage

104 Carbon Capture and Storage Association (CCS 027), Grantham Research Institute, LSE (CCS 028)
105 Qq5 [Mr Warren], 34 [Mr Gomersall, Mr Simon-Lewis], Capture Power (CCS 037)
106 E3G (CCS 033)
107 CO
2
Capture, Transport and Storage, POSTnote 335, Parliamentary Office of Science and Technology, June 2009
108 Zero Emissions Platform (CCS 007)
109 Q89
110 Qq33 [Mr Simon-Lewis], 56 [Mr Simon-Lewis], HC Deb, 9 December 2013, col 2WS

infrastructure would be required.
112
Ms Paxman, Policy and Communications Director at
2Co Energy, argued that certainty was required to help develop common infrastructure:
If we have a clear enough signal from Government about the scale of CCS
that is likely to arrive, the construction of oversized infrastructure is not, in
our view, a major hurdle for the industry. [...] What is needed is that clear
signal, both for the funding community and for the project developers.
113

This is something the UK CO
2
Storage Development Group has planned to explore. The
Minister told us that his Department had been working with that group and would
continue to do so to, see how best we can ensure that transport infrastructure and storage
infrastructure is shared between the various developers, and what the actions are on the
part of Government to achieve that.
114

113 Q56 [Ms Paxman]
114 Q141

Figure 4: Proximity of the UKs largest industrial emitters to CO2 storage sites in the North
and Irish Seas


43. It is astonishing that the Government has done so little to actively promote clustering
given the benefits of doing soincluding offering the greatest potential for cost reduction.
It serves as another example of how long it has taken the Government to encourage the
deployment of CCS. The Minister should quickly set out, in consultation with the UK CO
2

Storage Development Group, a detailed action plan for how the Government will
incentivise clustering of CCS infrastructure.

Enhanced Oil Recovery
44. EOR involves injecting CO
2
into depleted reservoirs to assist in extracting some of the
remaining oil or gas. While some believed that EOR would have been prohibitively
expensive in the UK at the present time, others, including the CCS Cost Reduction Task
Force, were keen to see it pursued.
115
2Co Energy, which was actively seeking to develop
EOR, described it as a, critical value driver in establishing a vibrant CCS industry

highlighting potential benefits such as reduced storage costs, additional taxation revenue
from incremental oil production, and the employment and security of energy supply
benefits by extending the life of declining North Sea oil fields.
116

45. Some EOR research projects are already underway (e.g. the EOR Joint Industry project
in the North Sea, funded by the Scottish Government and some private companies), but if
EOR is to develop successfully in the UK it will probably need policy intervention.
117
The
Crown Estate suggested that any policy developed for CCS needed to enable opportunistic
deployment for all sectors that could make use of the infrastructure including the offshore
oil and gas sector for EOR.
118
There is only a specific window of opportunity during the
lifetime of an oil field when EOR can be implemented efficiently.
119
The Grantham
Research Institute argued that missing the window could mean that a CCS project lost its
potential for profitability.
120

46. DECCs response to the CCS Cost Reduction Task Force said that it had, undertaken a
comprehensive mapping exercise to estimate the EOR potential in the North Sea.
121
It
identified that CO
2
-EOR potential in the North Sea was substantial. DECC is now
exploring with industry the extent to which CO
2
-EOR could play a significant role in the
UKs CCS Strategy and help extend the life of the North Sea. It has held workshops with
industry to explore these issues and will use the outputs to shape a joint industry-
Government work programme to evaluate the North Sea CO
2
-EOR opportunities in more
detail. DECCs response indicated that the Wood Review (a review of UK offshore oil and
gas recovery and its regulation, led by Sir Ian Wood) would also look at EOR. It suggested
that Sir Ians conclusions would influence the type of policy levers the Government would
use to encourage EOR including tax policy:
While the [Wood] Review will not make recommendations on taxation, its
conclusions may nevertheless be drawn upon in future tax policy
considerations by HM Treasury.
122

115 Simon Shackley et al (CCS 003), Rodney John Allam (CCS 034), Capture Power (CCS 037), DECC (CCS 042)
116 Qq35, 40, 2Co Energy (CCS 035)
117 Scottish Carbon Capture and Storage (CCS 024), Grantham Research Institute (CCS 028)
119 E3G (CCS 033)
121 DECC, CCS in the UK: Government response to the CCS Cost Reduction Task Force (October 2013)
122 Sir Ian Wood, UKCS Maximising Recovery Review: Final Report (February 2014)

The Wood Review stated that, the industry must be encouraged to invest more in [EOR]
schemes.
123
The Government has said that it will accept and fast track the implementation
of the Wood Reviews recommendations.
124
The Crown Estate emphasised the potential
benefits of using tax breaks to incentivise CCS deployment.
125
Despite this the Minister
would not be drawn on whether the Government would be providing tax breaks to
incentivise the development of EOR, although he did state, there is huge incentive for the
Treasury in getting these arrangements right for the final third of the North Sea story.
126

47. We are pleased that the Government has accepted Sir Ian Woods recommendations
into maximising the recovery of UK oil and gas and is actively working with industry to
explore the potential for enhanced oil recovery (EOR) to prolong the life of the North Sea
reserves. We recommend that the Government should consider providing tax breaks to
CCS consortia and oil and gas companies which pursue EOR.
Industrial CCS
48. The ETI argued that, many of the most valuable applications of CCS lie outside the
electricity generation sector.
127
However, without a strong carbon price or some other
support mechanism, the cost of deploying industrial CCS is prohibitive.
128
The Mineral
Products Association highlighted, for example, that, a CCS cement plant will be double
the costs of a non-CCS equivalent.
129
Mr Nicholson, Director of the Energy Intensive
Users Group (EIUG) highlighted competitiveness issues stating:
Given that our competitors outside Europe and elsewhere in highly
competitive markets do not have to face these [carbon] costs at all [...] it is
difficult to see how the commercial case for an energy intensive firm could be
made for significant demonstration let alone industrial scale rollout of
CCS.
130

Mr Nicholson went on to state that, right at the moment in the absence of a means of
making the commercial case and an inability, unlike the power sector, to pass those costs
on to consumers in international markets, the commercial case for investment simply
cannot be made.
131

49. In the long-run, it is difficult to see how decarbonisation of industrial sectors in the UK
could be achieved without CCS. Mr Nicholson said that his members would rather see

123 Sir Ian Wood, UKCS Maximising Recovery Review: Final Report (February 2014)
124 Wood sets out 200 billion roadmap for future of offshore oil and gas industry & worlds first gas CCS plant planned, Department
for Energy and Climate Change press release, 24 February 2014
126 Q145
127 Energy Technologies Institute (CCS 012)
128 Q34 [Mr Nicholson], Energy Technologies Institute (CCS 012), Shell International (CCS 017)
129 Mineral Products Association (CCS 023)
130 Q34 [Mr Nicholson]

work on this start sooner rather than later.
132
This was echoed by other respondents who
were keen to see development of industrial CCS move in parallel with, rather than
sequential to, power sector CCS so as to avoid reducing future options for decarbonisation.
This would include conducting appropriate research and development, funding pilot
projects and making a strategic assessment of the best places to site transport infrastructure
to reduce the costs of that part of the CCS chain to industry (see paragraphs 40-41).
133

50. Government action on industrial CCS has so far been limited. Some in industry are
keen to see what support it might offer in future.
134
The Governments Heat Strategy
acknowledges that industrial CCS could be a key technology for the decarbonisation of the
industrial sector but stopped short of making any specific recommendations. It stated that
the Governments CCS Roadmap would, set out the Governments interventions and the
rationale behind them.
135
Mr Littlecott of E3G highlighted, however, that the Roadmap
only made a passing reference to industrial CCS. He hoped that any further version of the
Roadmap would set out more detail.
136
The Minister told us that he was confident that
there was a, real opportunity here for the industrial application of [CCS] technologies
once we get them properly tested.
137
The Minister told us that Government was currently
funding a number of techno-economic studies of industrial CCS but highlighted that:
We do not yet have enough evidence as to how industrial CCS can best be
deployed, and there is more work to be done with academia and with
industry to provide the data that we need.
138

The Minister was, however, careful to point out that support for industrial CCS would not
be the same as for the power sector.
139

51. Industrial CCS is one of the only large-scale mitigation options available to make
deep reductions in the emissions from industrial sectors. We are disappointed that the
Government has so far paid little attention to it. We recommend that the Government
update its CCS Roadmap this year and outline in greater detail what role it envisages for
industrial CCS and how it intends to support it.
Safety and reputational risks
52. Like any large-scale industrial activity there are hazards associated with CCS which
could impact on human safety and the environment, if not properly managed.
140
These
risks include, for example, leaks from pipelines and geological stores and underground

133 Q34 [Mr Gomersall, Ms Paxman], The Crown Estate (CCS 019), TUC (CCS 022)
134 Minerals Product Association (CCS 023)
135 DECC, The Future of Heating: A strategic framework for low carbon heat in the UK (March 2012), p90
136 Q27 [Littlecott]
137 Q115
138 Q116
139 Q163
140 Plymouth Marine Laboratory (CCS 005), UK Advanced Power Generation Technology (CCS 011)

tremors as a result of large subsurface fluid injection.
141
The industry is confident that the
risks are low because CO
2
and its technical and safety properties are very well understood,
both above and below ground, from many decades of oil and gas experience in the US and
the North Sea.
142
The Health and Safety Executive (HSE) stated that existing legislation will
allow for effective inspection and enforcement of health and safety standards associated
with CCS projects.
143
Professor Gibbins told us that the first storage sites were very unlikely
to leak because they were the best geologically.
144

53. Despite industry, academic and regulatory confidence, we note that CCS projects have
been cancelled in several countries including the US, the Netherlands, and Germany in
large part due to public opposition.
145
A survey undertaken in 2013 showed that public
awareness and understanding of CCS was weak (and had reduced over time as
demonstrated by figure 5)and in many cases likely to be negative.
146
Dr Reiner at the
University of Cambridge, who conducted the survey, suggested that the potential risk of
public opposition in the UK, thought currently quiescent, could not be disregarded, given
low levels of public awareness, persistent low levels of knowledge, a preference for other
low-carbon options and the inevitable increase in opposition when reference is made to
actual government spending and siting CCS infrastructure (see figure 6).
147

141 James Verdon et al (CCS 002), Engineering the Future (CCS 032)
142 Qq57, 59 [Mr Gomersall], Chris Hodrien (CCS 004), Shell International (CCS 017)
143 DECC (CCS 042)
144 Q78
145 Simon Shackley et al (CCS 003)
146 Qq67, 83 [Dr Reiner], David Reiner (CCS 025)
147 David Reiner (CCS 025)

Figure 5: Do you think "Carbon capture and storage" or CCS can or cannot reduce each of the following
environmental concerns?
Source: David Reiner (CCS 025)

54. Others argued that storing CO
2
offshore in the UK would reduce the risk of public
opposition.
148
Dr Shackley, Lecturer in Carbon Policy at the University of Edinburgh,
disputed this claim citing in support of his position: controversies over Brent Spa, the
legacy of the Gulf of Mexico drilling disaster and offshore wind.
149
The UK has previously
experienced significant opposition to new infrastructure such as coal plant, onshore wind
and shale gas exploration which in some instances has been driven by misinformation and
misunderstandingsomething we noted in our 2012 report, The Impact of Shale Gas on
Energy Markets.
150
This underlines the essential need for Government to adopt a proactive
approach to communication around major infrastructure projects including CCS.
However, Government efforts have been disappointingly slow. Dr Reiner highlighted two
recommendations in a Science and Technology Committee report
151
published almost a
decade ago:

148 Qq20 [Mr Littlecott], 72 [Dr Reiner]
150 Energy and Climate Change Committee, Seventh Report of Session 201213, The Impact of Shale Gas on Energy Markets, HC 785,
para 32
151 Science and Technology Committee, First Report of Session 200506, Meeting UK Energy and Climate Needs: The Role of Carbon
Capture and Storage, HC 578-I, para 95-97
0% 50% 100%
Can reduce Does not reduce Not sure
2013
2004
Global warming
Ozone depletion
Smog
Acid rain
Water pollution
Toxic Waste
Resource depletion
Global warming
Ozone depletion
Smog
Acid rain
Water pollution
Toxic Waste
Resource depletion

Recommendation 32 was, Clear and transparent information about CCS at
an early stage will be crucial for securing public acceptance. The Government
must therefore adopt a proactive approach to communication. And 33, The
Government has done little so far to engage the public in a dialogue about
CCS technology. We accept that it is early days for the technology but
previous experience has emphasised the value of early engagement. Here we
are almost nine years later and I do not think those two very legitimate
recommendations have been taken on board. I do not think there have been
efforts to engage the public.
152

Figure 6: To what extent do you support or oppose this commitment/proposal?

Source: David Reiner (CCS 025)

55. The Energy Minister responded constructively to suggestions that his Department
should look into developing a proactive engagement strategy. He said he would, reflect on
whether we could do something stronger at the national level.
153

56. Framed in positive terms, and with the benefits effectively communicated to the local
population, CCS could enjoy public support and avoid controversy.
154
Mr Littlecott, Senior
Policy Adviser at E3G provided the example of Lacq in France which despite storing CO
2

onshore has not experienced local opposition because local people have been brought into
what that project has been seeking to do.
155
In addition, two companies with CCS projects
in Yorkshire, Capture Power and 2Co Energy, reported that they had not encountered
opposition. Ms Paxman of 2Co Energy suggested that this might be the case because the
economy in that region had, for many years, already been involved in fossil fuel power

152 Q69
153 Q151
155 Q20 [Mr Littlecott]

generation.
156
Achieving support for CCS would require the Government, the regulator
and industry not only to emphasise the safe nature of CO
2
storage technology but also to
demonstrate that they are trustworthy and competent.
157
Engagement would need to start
early, emphasise that the purpose was to listen and respond to public concerns and avoid
attempts to overly control and manage the process.
158

57. It is very disappointing that after almost a decade the Government has still not
recognised the need for a proactive approach to communicating CCS and instigated an
appropriate programme. The Government cannot delay this any longer. We recommend
that in order to address public opposition to CCS - similar to that experienced in other
countries and in the UK in relation to other energy infrastructure - and to try and prevent
it from growing, the Government develops and implements a national CCS engagement
strategy framing CCS in a positive way, emphasising the potential benefits, dispelling
myths and listening and responding to public concerns over safety. The Government
should also mandate through licence conditions for CCS companies to develop and
implement their own engagement strategies with local communities. This should be done
before final investment decisions (FID) are taken.
Regulatory risk
58. Storing CO
2
underground presents significant risks to storage providers despite low
probability of leakage. These risks include environmental impacts as well as legal, financial
and reputational impacts associated with leakage. While insurance mechanisms could
mitigate some of these risks, some liabilities were considered essentially uninsurable.
159

CO
2
storage is regulated by the EU CCS Directive (2009/31/EC). We heard that the
Directive imposed unreasonable and unnecessary burdens, risks and uncertainties on
storage providers.
160
In particular it imposes uncapped liabilities on operators of stores over
long time horizons which may prove to be a barrier to investment and could deter
potential project developers.
161
Of particular concern was the duration and sum of
payments required to cover possible liabilities which are yet to be resolved.
162

59. The CCS Directive is due to be reviewed by the European Commission in 2015. The
UK Advanced Power Generation Technology Forum suggested that it would be
appropriate to address issues to do with liability at that time.
163
The Minister told us that
the Government was going to, engage with the Commission as part of the review but
would not be drawn on whether the legislation was fit for purpose.
164
We note that DECC

156 Qq60-61
158 As above
160 Zero Emissions Platform (CCS 007)
161 UK Advanced Power Generation Technology Forum (CCS 011), Energy Technologies Institute (CCS 012)
162 Q59 [Jane Paxman]
163 The European Commission plans to review the CCS Directive in 2015
164 Q143

stated in its evidence to us that to be deployable at scale CCS must be, supported through
regulatory arrangements that facilitate CCS.
165

60. The CCS Directive has been transposed into UK legislation and will be enforced by the
UK Government and its relevant regulatory bodies. How it will be interpreted and
implemented will depend upon the outcome of the negotiations for the first CCS projects
between industry and the regulator.
166
The Grantham Research Institute at LSE and others
emphasised that liability issues require some form of Government guarantee.
167
SCCS, for
example, stated that:
It is inevitable that the UK state must take long-term ownership of stored
CO
2
. Transfer of ownership needs to be explicitly guaranteed, and at a date
soon after completion of an injection project.
168
.
Ms Paxman of 2Co Energy hoped that the agreements that were reached could be shared
with industry so that there was a better understanding of exactly how the CCS Directive
was being implemented.
169
The Minister stated:
Yes. I think there have been some uncertainties in this area at the moment,
because it is so new, as to exactly which European legal requirements apply in
this area, but I think the developers will have to resolve that as they go, case
by case, with the appropriate regulator.
170

61. We recommend that the Government takes the opportunity, during the European
Commissions review of the CCS Directive in 2015, to ensure that the Directive does not
place unnecessary burdens on storage providers. The liabilities linked to long-term
ownership of stored CO
2
will require some form of Government guaranteeand the
Government will need to seriously consider taking long-term ownership of stored CO
2
.
The Government will need to take this decision very soon to avoid deterring investment.
Scientific and engineering challenges
62. It was repeatedly asserted that scientific and engineering challenges were not major
factors preventing the development of CCS.
171
Mr Warren CEO of the CCSA argued that
the number of CCS projects operating or under construction around the world, gives us a
high degree of confidence that this is not a technical or scientific challenge.
172
Despite this
there is limited experience in integrating the components which make up CCS into full-
chain projects.
173
Ongoing research and development will be critical to drive improvements

165 DECC (CCS 042)
166 Qq59 [Paxman], 142
167 Zero Emissions Platform (CCS 007), Grantham Research Institute (CCS 028)
169 Q59 [Jane Paxman]
170 Q142
171 Qq15-16, UK Advanced Power Generation Technology Forum (CCS 011), Carbon Capture and Storage Association (CCS 027)
172 Q16 [Mr Warren]
173 International Energy Agency (CCS 043)

in all aspects of the CCS chain.
174
The UK is fortunate in having excellent academic
expertise and significant research and development underway into all three parts of the
CCS chain.
175
As pointed out by Mr Spence, Vice President of Strategic Issues at Shell,
companies in the competition should be obliged to share learning from early CCS
projectssomething we are pleased the Government has committed to ensuring through its
Knowledge Transfer Programme.
176

63. Of particular importance is the development of storage capacity. Dr Goldthrope,
Programme Manager at the Crown Estate, highlighted that early provision of storage at
scale is critical to bringing down costs.
177
The UK theoretically has significant storage
potential (see paragraph 25) but at the momentin practical termsit is scarce.
178
The UK
CCS Research Centre highlighted the long time that is required to identify, characterise,
model and potentially test CO
2
injection at storage sites before permission to store CO
2
at a
site is granted.
179
The Crown Estate reported that this process was time-consuming and, at
the later stages of site characterisation costly. It was not surprising, they argued, that,
storage is therefore currently regarded as the most risky part of the CCS chain for project
developers.
180
Failure to develop this storage could slow the overall deployment of CCS.
Professor Haszeldine of SCCS argued that:
We are investigating storage at a rate that is about 100 times too slow at the
moment; we need to have a literally two orders of magnitude scale-up of that
investigation rate if we are to deliver CCS by mid-2020s and by 2030 at the
scale we need to do it to decarbonise our electricity system.
181

64. Dr Neufeld, University Lecturer at the University of Cambridge, suggested that while
there were places which could be used immediately to store CO
2
because of the knowledge
already gained from oil and gasthere were also a number of places where we still knew
very little.
182
The Grantham Research Institute at LSE reported that in the UK, storage
capacity in oil and gas fields could range from 7.4 to 9.9 billion tonnes of CO
2
and, the
storage potential of saline fields is more uncertain, and could range from 6.3 to 62.7 billion
tonnes of CO
2
.
183
The large uncertainty around the figures highlights the significant
geological work still required to fully appraise storage sites to ensure CO
2
injection and
storage can meet technical, regulatory and societal requirements.
184

174 Q79 [Dr Reiner, Professor Gibbins], Engineering the Future (CCS 032), International Energy Agency (CCS 043)
175 Q160, James Verdon et al (CCS 002), Plymouth Marine Laboratory (CCS 005), Research Councils UK (CCS 006), UK CCS Research Centre
(CCS 010), Energy Technologies Institute (CCS 012), The Crown Estate (CCS 019)
176 Q31, DECC (CCS 042)
177 Q5 [Littlecott, Goldthorpe]
178 Q24 [Littlecott]
179 UK CCS Research Centre (CCS 010)
181 Q6 [Professor Haszeldine], Scottish Carbon Capture and Storage (CCS 024)
182 Q76
184 Energy Technologies Institute (CCS 012), Geological Society (CCS 040)

65. Much of this could be achieved successfully through a learning by doing approach
and an effective R&D programme.
185
We note that the Energy Technologies Institute (ETI)
in partnership with the British Geological Survey (BGS) and the Crown Estate has
undertaken a study, UK Storage Capacity Project, to assess the UKs potential storage
capacity.
186
The UK CCS Research Centre recommended that further work on storage
could usefully be done. It argued that gaps in our knowledge of storage sites, could be
addressed by a programme of subsurface mapping to identify and characterise potential
storage sites, and recommended that it be, undertaken on behalf of UK regulators, using
currently available well and seismic data.
187
While the Centre recognises that this will not
provide all the answers, it suggests that this data could help to identify what further
research would be necessary to demonstrate a sites suitability for CO
2
storage.
188
The
Crown Estate also suggested that:
Specifically targeted storage exploration subsidies focused on early-stage
development of the industry, could be used to target new areas of storage or
incremental work at existing storage sites (which would bring wider
benefits).
189

The effect would be to de-risk the investment. The Crown Estate went on to explain that
the incentive could be relatively revenue neutral for Government if it was associated with
a project which would otherwise have required a higher CfD.
190

66. The Minister did not agree that the UK was exploring storage sites too slowly. He
suggested that, it is rather difficult for Government to direct how investment in the
infrastructure should be most cost-effective. I think that is better done by the companies
themselves. He said that the Government was focused on facilitating investment in
transport capacity and utilising existing infrastructure. He concluded by stating:
The difficulty really is nobody can yet be absolutely certain as to how much
CCS is going to be deployed and where the investment that makes it
commercially scalable is likely to be located. Storage is something we are
absolutely keeping an eye on, and where we can help as a Government, we
will.
191

While scientific and engineering challenges are not a major barrier to deploying CCS, it is
clear that ongoing research and development will be critical to drive improvements in all
aspects of the CCS chain. A critical area desperately in need of greater attention is offshore
storage. While theoretical storage potential is huge, actual current storage capacity is

185 Research Councils UK (CCS 006), UK CCS Research Centre (CCS 010), Geological Society (CCS 040)
186 More information can be found on the ETI website (http://www.eti.co.uk/technology_programmes/carbon_capture_and_storage)
and the CO
2
Stored website (http://www.co2stored.co.uk/)
187 UK CCS Research Centre (CCS 010)
188 As above
189 Energy Technologies Institute (CCS 012)
190 As above
191 Q140

scarce. Given the lengthy time period required to identify, characterise, model and test CO
2

injection at storage sites, failure to move ahead with storage identification now could slow
the overall deployment of CCS over the coming years.
67. The Governments focus on transport capacity rather than on storage capacity is
surprising given how critical early provision of storage is to bringing down costs. We note
the proposals outlined by the UK CCS Research Centre to undertake a programme of
subsurface mapping to identify and characterise potential storage sites and the Crown
Estates suggestion that Government introduce targeted storage exploration subsidies. We
recommend that the Government work with the UK CO
2
Storage Development Group to
explore these proposals and outline an action plan for actively promoting the
development of storage sites.
First mover advantage
68. The question remains whether the UK should try to be a first mover when developing
CCS (and reap the benefits of selling technology and know-how abroad) or whether the
UK should wait for other countries to develop CCS and import it (benefiting from cost
reductions made elsewhere). Professor Haszeldine, of SCCS, argued that in the light of
emerging CCS projects in other countries, the UK was, effectively starting to be in a
following position and receiving the benefits from those first projects de-risking and
driving the cost down.
192
He drew on experience from the Boundary Dam project in
Canada which estimated it could reduce the costs of the capture plant by 30% next time
round. He also cited the Texas Clean Energy Project (also behind the Captain Clean Energy
Project in the UK) which he estimated could make a 25% reduction in capital costs if it was
to do it a second time round.
193
In contrast, Professor Gibbins of the UK CCS Research
Centre highlighted that in some cases - such as applying CCS to gas-fired generation - the
UK was a first mover.
194

69. Dr Clarke of the ETI told us that CCS components will, inevitably come from major
global suppliers operating in a global market rather than just the UK.
195
It is unlikely,
therefore, that any one country will develop a comparative advantage in every aspect of the
CCS value chain.
196
Mr Littlecott of E3G agreed arguing that, because of the global market
for CCS, costs of capture technologies were likely to come down as a result of competition
from technology suppliers and equipment manufacturers. He suggested that, the UKs
efforts, however, will not fundamentally alter that technology profile.
197

194 Q81 [Professor Gibbins]
195 Q87 [Dr Clarke]
196 BASF (CCS 001)
197 Q5 [Mr Littlecott]

70. On the other hand, the UKs efforts could have more effect on the costs associated with
rest of the CCS transport and storage stages. E3G suggested that CCS deployment was
inevitably local in nature:
While it may of course be possible to import cheaper CO
2
capture technology
in future from China (to take a frequent example), it is not possible to
import geology, nor local geographies for transportation infrastructure. Nor
is it possible to radically alter the timetables of current North Sea oil and gas
fields experiencing declining production and which would be amenable for
use for CO
2
storage (either in combination with CO
2
-EOR or post-
production).
198

Dr Goldthorpe of the Crown Estate suggested that local knowledge and expertise built up
in the North Sea area was essential to future CCS development and could not be
imported.
199
Professor Haszeldine argued that, if the UK developed these local elements,
the UK would also be able to sell the technologies associated with injection and monitoring
of CO
2
building on the global reputation of the North Sea.
200

71. There is already a global market for carbon capture technologies. Companies
looking to deploy CCS in the UK may well be able to buy cheaper capture technologies
which have already been developed in other countries. Other aspects of CCStransport
and storage infrastructureare, however, inherently local in nature and will require
development here in the UK. The UK is well placed to take advantage of its existing
expertise in the North Sea oil and gas sector.

198 Q5 [Mr Littlecott], E3G (CCS 033)
199 Qq6 [Dr Goldthorpe], 87 [Dr Clarke]

3 Conclusion
72. CCS is one of the only technologies available that has the potential to decarbonise
fossil fuel power plants and other industrial processes. The capture, transport and
storage technologies involved are considered to be safe, the scientific and engineering
challenges small and the capacity to be deployed at scale promising. New and novel CCS
technologies, such as the NET Power cycle, have the potential to improve CCS
prospects. It is widely acknowledged that CCS could play an important role in helping
the UK to meet its carbon reduction commitments. This role may change over time to
take account of global policy developments including the 21
st
Conference of the Parties
in 2015. Although CO
2
emissions have reduced in this country and the EU, the carbon
footprint of both has increased. If CCS was widely adopted abroad, it could help to
reduce the UKs embedded carbon emissions. Deploying CCS in the UK could also
increase UK plcs future share of the global CCS market, create a North Sea storage
market whereby the service of permanently storing CO
2
was sold to other European
countries, and protect jobs associated with the UKs coal and energy intensive
industries. The UK is considered ideally suited to take advantage of CCS because of its
combination of geological, engineering, industrial and academic capabilities, together
with a stated policy commitment to reduce CO
2
emissions and the foundational
legislative framework required for CO
2
storage.
73. The combination of high energy andin the absence of an effective carbon market
financial costs make CCS uneconomic. The high cost of CCS means that it is likely to
develop only in response to specific policy intervention, likely to be subsidy from the
public purse and/or the consumer. The Government should be transparent about the
costs of CCS and how they will be met. The Government therefore needs to prioritise
designing a credible financial incentive framework most likely centred on the Contracts
for Difference which the Government is introducing as part of its electricity market
reforms. Progress on CCS in the UK has been frustratingly slow. It has taken successive
governments the best part of a decade to provide a capital grant to a large-scale full
chain CCS project. As a result, the expected start date of CCS has been pushed back
from 2014 to potentially after 2020 which has increased uncertainty and threatens to
undermine the credibility of Government policy. This lost decade is regrettable given
the importance of CCS to meeting future climate change targets.
74. In order to ensure the successful deployment of CCS in the UK the Government
should aim to reach final investment decisions with the two projects left in the
competition by early 2015 (in line with the Governments original competition
timetable) to increase the chance that the first CCS projects will be operational before
2020. This commitment is welcome: it will help to bring down costs of CCS more
quickly and, therefore, help the development of a wider CCS industry in the UK.
75. It is unclear whether any financial advantage accrues to first movers, so there is a
case for limiting the amount of consumer support which is allocated to the first CCS
projects. Indeed, it is likely that most benefits will be accrued by second movers, which

may explain why the big companies are reluctant to spend so much of their own money
at this early stage of CCS development. It would be wise for the Government to direct
its resources at the uniquely British aspects of CCS deployment such as transport and
storage infrastructure and overcoming potential public opposition to ensure the
maximum benefits for UK consumers are realised.


Conclusions and recommendations
Government support for CCS
1. The expected start date of CCS has been pushed back from 2014 to potentially after
2020. Given the widespread acknowledgement of the importance of CCS to meeting
future climate change targets this lost decade is extremely disappointing. While we
take note of recent efforts by Government to work more closely with industry to
accelerate CCS deployment, it is essential that the Government is able to commit to a
realistic but ambitious timeline for taking final investment decisions. The rest of this
report will look at what more the Government needs to do to accelerate CCS
deployment and support a wider CCS industry. (Paragraph 19)
Political and financial risk
2. As we have heard, delay has called into question the credibility of Government policy
designed to support CCS deployment. It is critical that the Government does not
waste any more time on unnecessarily delaying the start of the first CCS projects. We
recommend that the Government aims to reach final investment decisions (FID)
with the two projects left in the competition by early 2015 (in line with the
Governments original competition timetable). This offers the only hope of making
the first CCS projects operational by 2020. In turn this could help to bring down
costs of CCS more quickly and, therefore, help the development of a wider CCS
industry in the UK. (Paragraph 31)
3. The Governments Feed-in Tariffs Contracts for Difference (CfD) will be essential
for CCS projects as they will provide operational support as well as a route to market
for non-competition projects. The Government should set out immediately in what
ways CCS CfDs will differ from the more generic CfDs. We recommend that CfDs
be tailored to individual CCS projects because of the unique characteristics of CCS
(compared to other low carbon and renewable technologies). The Government must
engage in a dialogue with industry to ensure that CCS CfDs are designed
appropriately. (Paragraph 34)
4. Non-competition projects which do not have the benefit of being eligible for capital
support, but which are still viable projects, are at risk of collapsing unless they get a
clear signal from Government that they can negotiate with DECC for a CfD in
parallel with competition projects. We recommend that as soon as the Government
sets out more detail on the tailed nature of CCS CfDs, the Government should write
to the non-competition projects inviting them to start the process of negotiating for
CfD. (Paragraph 36)
5. The CCS industry would benefit from having more clarity on the amount of funding
available for CCS within the Levy Control Framework (LCF) up to 2021. It is also
essential that the industry have visibility on the LCF post-2021. The Government
should set out its thinking on the LCF post-2021 indicating whether the total will be
maintained in real-terms. (Paragraph 39)


Clustering and common infrastructure
6. It is astonishing that the Government has done so little to actively promote clustering
given the benefits of doing soincluding offering the greatest potential for cost
reduction. It serves as another example of how long it has taken the Government to
encourage the deployment of CCS. The Minister should quickly set out, in
consultation with the UK CO2 Storage Development Group, a detailed action plan
for how the Government will incentivise clustering of CCS infrastructure.
(Paragraph 43)
Enhanced oil recovery
7. We are pleased that the Government has accepted Sir Ian Woods recommendations
into maximising the recovery of UK oil and gas and is actively working with industry
to explore the potential for enhanced oil recovery (EOR) to prolong the life of the
North Sea reserves. We recommend that the Government should consider providing
tax breaks to CCS consortia and oil and gas companies which pursue EOR.
(Paragraph 47)
Industrial CCS
8. Industrial CCS is one of the only large-scale mitigation options available to make
deep reductions in the emissions from industrial sectors. We are disappointed that
the Government has so far paid little attention to it. We recommend that the
Government update its CCS Roadmap this year and outline in greater detail what
role it envisages for industrial CCS and how it intends to support it. (Paragraph 51)
Safety and reputational risks
9. It is very disappointing that after almost a decade the Government has still not
recognised the need for a proactive approach to communicating CCS and instigated
an appropriate programme. The Government cannot delay this any longer. We
recommend that in order to address public opposition to CCS - similar to that
experienced in other countries and in the UK in relation to other energy
infrastructure - and to try and prevent it from growing, the Government develops
and implements a national CCS engagement strategy framing CCS in a positive way,
emphasising the potential benefits, dispelling myths and listening and responding to
public concerns over safety. The Government should also mandate through licence
conditions for CCS companies to develop and implement their own engagement
strategies with local communities. This should be done before final investment
decisions (FID) are taken. (Paragraph 57)
Regulatory risk
10. We recommend that the Government takes the opportunity, during the European
Commissions review of the CCS Directive in 2015, to ensure that the Directive does
not place unnecessary burdens on storage providers. The liabilities linked to long-
term ownership of stored CO2 will require some form of Government guarantee
and the Government will need to seriously consider taking long-term ownership of
stored CO2. The Government will need to take this decision very soon to avoid
deterring investment. (Paragraph 61)

Scientific and engineering challenges
11. The Governments focus on transport capacity rather than on storage capacity is
surprising given how critical early provision of storage is to bringing down costs. We
note the proposals outlined by the UK CCS Research Centre to undertake a
programme of subsurface mapping to identify and characterise potential storage sites
and the Crown Estates suggestion that Government introduce targeted storage
exploration subsidies. We recommend that the Government work with the UK CO2
Storage Development Group to explore these proposals and outline an action plan
for actively promoting the development of storage sites. (Paragraph 67)
First mover advantage
12. There is already a global market for carbon capture technologies. Companies looking
to deploy CCS in the UK may well be able to buy cheaper capture technologies which
have already been developed in other countries. Other aspects of CCStransport and
storage infrastructureare, however, inherently local in nature and will require
development here in the UK. The UK is well placed to take advantage of its existing
expertise in the North Sea oil and gas sector. (Paragraph 71)
Conclusion
13. CCS is one of the only technologies available that has the potential to decarbonise
fossil fuel power plants and other industrial processes. The capture, transport and
storage technologies involved are considered to be safe, the scientific and engineering
challenges small and the capacity to be deployed at scale promising. New and novel
CCS technologies, such as the NET Power cycle, have the potential to improve CCS
prospects. It is widely acknowledged that CCS could play an important role in
helping the UK to meet its carbon reduction commitments. This role may change
over time to take account of global policy developments including the 21st
Conference of the Parties in 2015. Although CO2 emissions have reduced in this
country and the EU, the carbon footprint of both has increased. If CCS was widely
adopted abroad, it could help to reduce the UKs embedded carbon emissions.
Deploying CCS in the UK could also increase UK plcs future share of the global CCS
market, create a North Sea storage market whereby the service of permanently
storing CO2 was sold to other European countries, and protect jobs associated with
the UKs coal and energy intensive industries. The UK is considered ideally suited to
take advantage of CCS because of its combination of geological, engineering,
industrial and academic capabilities, together with a stated policy commitment to
reduce CO2 emissions and the foundational legislative framework required for CO2
storage. (Paragraph 72)
14. The combination of high energy andin the absence of an effective carbon market
financial costs make CCS uneconomic. The high cost of CCS means that it is likely to
develop only in response to specific policy intervention, likely to be subsidy from the
public purse and/or the consumer. The Government should be transparent about the
costs of CCS and how they will be met. The Government therefore needs to prioritise
designing a credible financial incentive framework most likely centred on the
Contracts for Difference which the Government is introducing as part of its
electricity market reforms. Progress on CCS in the UK has been frustratingly slow. It

has taken successive governments the best part of a decade to provide a capital grant
to a large-scale full chain CCS project. As a result, the expected start date of CCS has
been pushed back from 2014 to potentially after 2020 which has increased
uncertainty and threatens to undermine the credibility of Government policy. This
lost decade is regrettable given the importance of CCS to meeting future climate
change targets. (Paragraph 73)
15. In order to ensure the successful deployment of CCS in the UK the Government
should aim to reach final investment decisions with the two projects left in the
competition by early 2015 (in line with the Governments original competition
timetable) to increase the chance that the first CCS projects will be operational before
2020. This commitment is welcome: it will help to bring down costs of CCS more
quickly and, therefore, help the development of a wider CCS industry in the UK.
(Paragraph 74)
16. It is unclear whether any financial advantage accrues to first movers, so there is a case
for limiting the amount of consumer support which is allocated to the first CCS
projects. Indeed, it is likely that most benefits will be accrued by second movers,
which may explain why the big companies are reluctant to spend so much of their
own money at this early stage of CCS development. It would be wise for the
Government to direct its resources at the uniquely British aspects of CCS
deployment such as transport and storage infrastructure and overcoming potential
public opposition to ensure the maximum benefits for UK consumers are realised.
(Paragraph 75)


Annex
Canada programme and visit notes
18 November 2013
Professor James Meadowcroft and Graham Campbell
Professor James Meadowcroft, Canada Research Chair in Governance for Sustainable
Development and Graham Campbell, Executive Director, Carleton Sustainable Energy
Research Centre provided an overview of the politics and policy landscape of CCS in Canada.
Canada has very large energy resources including oil, gas, hydro, uranium and biomass.
The combination of abundant energy resources and lots of space has resulted in
Canada developing a very carbon intensive industrial structure. This makes it very
difficult for Canada to tackle climate change because the whole economy is carbon
intensive.
Climate change is not really in the public or Federal Governments consciousness and
as a result it has not made much progress on developing policies to tackle climate
change.
Canada abandoned its Kyoto targets because they were over ambitious and not
achievable.
There is some interest in new renewable in Canada although it has a lot of hydro.
However, the presence of oil and gas sector effects the flow of capital and disadvantages
the development of renewables.
The Federal Governments current approach is 'accelerated resource development'. The
objective is to utilise its resources as quickly as possible. As such, it has abandoned
sustainable development and built on responsible (use) development. The current
Governments position is unhelpful and partisan.
Policy fragmentation and jurisdictional diversification makes it difficult to develop a
national response to climate change.
There has been progress to tackle climate change at a provincial level. British Columbia
has introduced a carbon tax. Ontario has phased out coal and replaced it with gas.
Decarbonising will be cheaper with CCS in the mix. It is better to have more tools
rather than less (even though currently more expensive).
There are, however, several barriers. The biggest is the cost of developing CCS. CCS
also presents a split incentive: developers should in theory benefit by developing CCS,
however, currently it is more beneficial not to develop CCS. CCS is different to other

low carbon technologies. It has a 'structural problem' in that as a bolt on technology it is
undesirable to develop.
CCS will acquire strategic importance in the future especially for fossil fuel exporting
countries.
There is currently low public acceptance of CCS. The public are concerned about the
safety of storing carbon dioxide underground, end of pipe treatment, and lock-in to
high carbon technologies. There have also been low levels of public engagement.
CCS is seen by Federal Government as a problem to resource extraction. CCS is,
however, not dead. It is still important. It is only because Canada is not taking climate
change as seriously as should be. It will come back into fashion when it does.
CCS future still very uncertain in Canada. CCS in 2050 scenarios 1) high usage 2)
geographically fragmented usage 3) specialised usage (e.g. Industrial processes and
biomass). Industrial CCS is definitely a potential starter. There would be merit in public
policy focusing on industrial CCS. This is also because there is demand for pure CO
2

sources. However the key problem is what you do with it (storing or other commercial
uses)
CCS in Canada is closely related to enhance oil recovery. More so than a response to
climate change. Shell Quest project is one such example. Boundary Dam is also
interlinked with fossil fuel production. Basic problem in Canada is that there isn't a
national price on Carbon. EOR dilutes the benefit of the CCS. There are trade-offs
there. However, benefits are that it already has existing infrastructure and it is possible
to continue to inject carbon dioxide after EOR has finished.
CCS costs are clouded in uncertainty. People and industry are propagating the
uncertainty.
It is hard to say when Canada might realistically see commercial scale CCS. Need to
progress CCS along the learning curve. This requires many power plants with CCS to
be built. This is, however, a long way off. Depends on whether enough projects get up
and running and on how much investment and when.
The International Energy Agency (IEA) CCS roadmap outlines 7 key barriers.
Financial barriers: good. Policies re CCS: none. Laws and regulations requiring CCS:
no. Other uses for CCS: no, not looking at industrial. Public info and engagement: no.
Reducing costs: no. Infrastructure requirements: doing quite well. Useful check list
would be difficult.
Dr. Roman Szumski
Roman Szumski, Vice-President Life Sciences, National Research Council (NRC) outlined
research being undertaken on algal carbon conversion a potential second generation CCS
technology.

The NRC is a departmental agency. It has a President which reports to Cabinet. The
detailed research agenda is developed by the NRC and government provides a high
level steer.
The NRC jointly develops technologies with industry. It expects to make a return, along
with its industry partners, which is recycled back into research.
Algal carbon conversion involves converting a waste productgas emissions and waste
water from an industrial processand using algae to convert it into valuable products
(as well as remediated waste water and industrial emissions).
This technology has the potential to be applied to an oil sands site and in other
industrial sectors such as cement
The NRC has ambitions to develop a 100,000 litre test plant. This is small enough so as
to be easily transportable (to remote parts of the country) and large enough to be scaled
up if desired.
The algae which is being used is a local and natural strain to reduce the potential risk of
contaminating the Canadian environment.
Industry believes the technology could be commercially viable. The NRC is partnering
with several companies. Industry buy-in came when the NRC switched from saying
'making biofuels' to 'managing carbon dioxide'.
There are, however, several barriers to taking up the technology. Questions remain over
how transferable the technology because of the unknown attributes on algae strains. It
is still uncertain the extent to which the technology can be scaled-up.
David McLaughlin
David McLaughlin, Strategic Advisor to the Dean of Environment, University of Waterloo
provided an overview of the politics of energy and climate policy in Canada.
At the moment Canada will not meet its 2020 carbon targets.
It will not meet them unless the oil and gas industry plays its part.
Modelling how to achieve carbon reductions in Canada always includes CCS.
Incentivising CCS will require the development of a carbon price. This would need to
be over $100. However, it is unlikely that the economy will not bear a carbon price this
high. As such it is unlikely that there will be significant CCS in Canada any time soon.
Clare Demerse
Clare Demerse, Director of Federal Policy, Pembina Institute provided an overview of the
politics of energy and climate policy in Canada.

Even though energy is a provincial competency, it is still highly influenced by the
Federal Government.
The Federal Environment Minister says that Canada will meet its 2020 carbon targets.
But nobody else thinks there is a plan in place that will help Canada actually achieve it.
The projected growth in oil sands, according to the Federal Governments own
projections show that it will cancel out and eclipse any other carbon savings made
elsewhere in the economy.
Understanding what solutions there are to reduce the carbon impact of oil sands are
crucial for climate change action in Canada. CCS will be fundamental but is very
expensive when applied to the oil sandseven more than coal with CCS.
CCs would require a carbon price of $100 a tonne of more. However, there is currently
vehement opposition to economy wide carbon pricing. Instead Canada is taking a
sector by sector, bottom-up approach. But there is very little attempt to scale it up to
meet Canadas 2020 targets. At present the fossil fuel industry is not going to be a
strong enough policy signal to incentivise the development of CCS. There are unlikely
to be new CCS subsidies in the short term.
Originally, Canada was expecting to be requiring CCS level standards on oil sands and
coal in order to help meet Canadas 2020 carbon targets. No longer think this is
remotely on the table.
David Sawyer
David Sawyer, Associate, International Institute for Sustainable Development provided an
overview of the politics of energy and climate policy in Canada.
In 2008/09 Canada was looking at how to achieve it targets and at this time CCS
featured strongly. Large allocation of resources were given over to incentivising CCS.
Today CCS doesnt come up as an issue at all. As such, we are not asking enough of our
fossil fuel companies.
Internal drivers (such as market access, carbon prices and competition) in Canada are
not strong enough to drive CCS development in Canada.
External drivers are however starting to develop which may incentivise CCS in Canada.
This includes the potential development of a clean fuel standard in the US (a key export
market for Canada). The oil and gas industry in Canada has an eye on these
developments but is still not currently developing CCS. This is largely because there is
little appetite for CCS in the whole of North America.
Canada is going to have to require global drivers to develop CCS. This will develop if
Canada is able to build pipelines which allow it to export fossil fuels to Asian and
European markets.

Alex Wood
Alex Wood, Senior Director, Policy Markets provided an overview of the politics of energy
and climate policy in Canada.
Canada cannot meet its targets without CCS. But Canada also has a lot of cheaper
emissions reduction opportunities which are currently not being realised. The
Canadian Government is currently pursuing a high cost carbon reduction pathway.
The economics of CCS projects are very daunting. Shells Quest project is considered to
be a money loser (even with the money they are getting from the Federal and Provincial
Governments). Shell is pursuing this project because of reputational issues and their
vulnerability when looking at the oil sands involvement. They are doing CCS because
of the reputational gain of being able to say that they are cleaning up the oil sands.
What policy would take CCS forwards in Canada? It will require a combination of
carbon pricing, mandating CCS, and external pressures.
Michael Keenan
Michael Keenan, Associate Deputy Minister at Natural Resources Canada outlined what his
Department was doing to incentivise the development of CCS in Canada.
CCS is a key part of the overall energy strategy of the country. Canada has some of the
best geological stores for CCS as well as a number of potential streams for using CCS.
Canada will have an emissions performance standard for new coal. Existing coal has to
close down at the end of its economic life unless it retrofits CCS. This is a CCS 'runway'.
There is a significant incentive to continue the use of coal with CCS.
Federal Government greenhouse gas emissions regulations have a positive impact on
CCS. He believed that that there is an opportunity for collaboration on CCS between
Canada and UK. Energy is important to the Canadian economy.
CCS will enable continued and sustained use of fossil fuels.
The Federal Government has a role to facilitate investment in CCS and looks to
promote national and international work on CCS.
CCS in Canada is comprised of 3 things 1) technology evolution 2) market evolution 3)
government policy evolution.
Canada has 4 objectives 1) reducing technological risks 2) providing a stable regulatory
framework 3) gaining public acceptance 4) learning-by-doing to reduce costs and risks
(sharing learning).
Canada is active in R&D on all types of capture technologies not just post combustion
but main focus is on 'step change technologies'.

The Government has increased its expenditure on CCS (20% of expenditure in 2011
2012). However, this will peak because a lot of the money is going into large scale
demonstration projects. The rest will be on ongoing R&D but which is a much smaller
proportion of funding.
Federal Government has said its not pursuing a national carbon pricing strategy. It is
pursuing a regulatory strategy instead. The Government thinks that this strategy will be
successful. Doesn't think to price is essential. The Government supports 4 large scale
CCS projects 1) Weyburn-Midale 2) SaskPower Boundary Dam 3) Shell Quest project
4) Albert Carbon Trunk Line. These projects are helping to increase the efficiency of
CCS technology. Boundary Dam project specifically should, it is hoped, help to move
CCS along the cost curve.
Canada is doing quite well in relation to other countries evidenced by the global CCS
institute. In fact Canada's investments have put Canada on the world stage in terms of
CCS.
Public engagement efforts are ongoing.
Government is trying to share learning internationally through both bilateral and
multilateral forums.
Canada has advanced 3 large-scale CCS projects (on time and on budget).
Mike Beale
Mike Beale, Assistant Deputy Minister at Environment Canada outlined what his
Department was doing to incentivise the development of CCS in Canada.
Focus is environmental outcomes: in this case greenhouse gas emissions (GHG)
emissions.
To what extent can CCS be incorporated into our regulations? Example, coal fired
regulations. That is 420 grams of CO
2
equivalent. This is structured unit by unit. So,
therefore, either need to have CCS on a plant or not at all. Sets emissions performance
standard both for new coal and old coal which has reached the end of its economic life.
Boundary dam. Worked closely with SaskPower to develop these regulations so that it
made sense to potentially apply CCS to its units 4 and 5.
However, under these regulations it may make more sense to build a new gas fired
power station rather than a new coal fired power station with CCS.
Regulations are time based. There is very little flexibility in the regulations (no trading
etc). There is, however, a 10 year deferral mechanism.
The regulations are driving significant reductions in coal fired electricity generation.
Unfortunately however coal is not a big enough part of the pie to ensure it is able to
meet its targets.

Actions taken today brings Canada 50% of the way to meeting its targets
Departments approach to incentivising reducing emissions. No financial incentives.
Function is regulatory. Taking a sector by sector regulatory approach. Started with
transportation sector. Now developing a suit of regulations for oil and gas sector
including for oil sands. Have another suit of regulations for energy intensive industries.
These regulations are designed to help reach the target (the extra 50%)
It is hard to see that CCS will make a major contribution to the 2020 targets.
Dinner hosted by Howard Drake, British High Commissioner with Leon Benoit MP,
Chair of the Standing Committee on Natural Resources; the Hon. Geoff Regan, PC, MP,
Vice-Chair of the Standing Committee on Natural Resources and Liberal Natural
Resources Critic; the Hon. John McKay PC, MP, Liberal Critic for the Environment;
Christine Moore MP, Member of the Standing Committee on Natural Resources and
NDP Deputy Critic for Energy and Natural Resources; Linda Duncan MP, Member of the
Standing Committee on Natural Resources and NDP Critic for Public Works and
Government Services; Mike Allen MP, Member of the Standing Committee on Natural
Resources; and Brad Trost MP, Member of the Standing Committee on Natural
Resources.
19 November 2013
Kyle Worth
Kyle Worth, Project Manager, Aquistore, Petroleum Technology Research Centre outlined
work being done to store carbon dioxide underground.
Petroleum Technology Research Centre is a not-for-profit research and development
organisation. Aquistore is a research and development project looking to store carbon
dioxide in a saline aquifer pulling together lessons learnt from nearby carbon capture
and storage projects.
This site has a number of advanced technologies which, it is hoped, will facilitate and
improve the injection, storage and monitoring of future carbon storage projects. They
are also hoped to bring down the cost of future projects.
Aquistore is only six miles from the nearest city. There are 20 families nearby. They
have undergone a significant amount of proactive public engagement with the local
community. This includes actively visiting the local community to inform them of the
project, holding an open house, allowing visits during operations (which is not
normally allowed) and having a clear and comprehensive document explaining how
Aquistore were going to move through the process. They have also developed materials
which explain how the local geology will stop any leaks from occurring.
They are hoping to start commercial injection into the aquifer in early 2014.
They are also hoping to work with UK academics to collaborate and share data.

Robert Watson
Robert Watson, Chief Executive Officer at SaskPower provided a background briefing on
SaskPower.
SaskPower is a fully integrated power company with generation, transmission and
supply businesses. It produces almost all its own power. Five years ago it entered into
its first power purchase agreements with privately owned gas power plants and a wind
farm.
SaskPower has 4,104 MW generating capacity. 50 per cent is coal, 25 per cent is gas, 20
per cent is hydro, three per cent is wind and 2 per cent comes from other sources. The
strategic aim of the company is to diversify is generation sources. It wants to expand
gas but not become over reliant on it. It also wants to protect its coal assets. It is also
looking at geothermal and solar will probably come into the fleet as the costs come
down.
SaskPower has seen an eight per cent increase in energy consumption. This increase is
mostly coming from industrial developments such as pot ash mines, uranium, oil sands
and agriculture.
Saskatchewan is the first jurisdiction in Canada to be completely smart metered both
business and domestic customers. Hope to be able to test out the smart grid as well as
smart generation.
Ian Yeates
Ian Yeates, Vice-president at SaskPower outlined SaskPowers approach to CCS.
SaskPower has a lot of experience in CCS in Saskatchewan including in the Weyburn-
Midale, Aquistore and Boundary Dam projects.
At Boundary Dam, units one and two (65MW) are old, worn out and will be shut
down. Unit 3 (150MW) being fitted with CCS. The futures of units four and five
(300MW) have not yet been decided.
There is a potential future difference between supply and demand in Saskatchewan. For
example, the province has seen significant growth in demand while faced with the
prospect of closing its coal facilities. The development of CCS would, however, mean
that this is less of a problem.
SaskPower has estimated that their new CCS plant will cost them $1.4bn. When
comparing the cost of Coal plant with CCS to the best alternative, gas fired plant you
see that the majority of costs for gas are in the fuel while for coal the majority of costs
are in the capital investment. Furthermore, they estimate that when you factor in the
revenue from selling carbon dioxide for enhanced oil recovery the costs of coal with
CCS fall within the gas cost range.

Dinner with Robert Watson, Chief Executive Officer at SaskPower and Provincial
Government representatives.
20 November 2013
Tour of SaskPowers Boundary Dam CCS project with Michael Monea, President of
SaskPower.
21 November 2013
Chris Holy
Chris Holy, Branch Head, Research & Technology, Resource Development Policy Division,
Alberta Department of Energy provided an overview of the energy landscape in Alberta and
its approach to resource development with specific emphasis on CCS.
Alberta has been an energy producing province for over 100 years. There is a high level
of social trust in Alberta. The provinces resources are owned by the Crown. Private
companies are used to extract the resources. As such, it only takes royalties and collects
information using a third party regulator which provides a quality control function.
There is a high degree of labour mobility which helps to transfer knowledge and creates
a culture of innovation.
Alberta has a huge resource base. Primary energy production is dominated by fossil
fuels.
Demand is lower than supply. Alberta therefore exports most of its energy. Alberta is
looking for new markets to export to.
Alberta is also looking at opportunities to diversify their energy production. This
includes looking at what other opportunities there are outside of fossil fuel production.
There has been a trend away from coal fired generation towards gas generation with
some renewables. This shift to gas is also being used for heat (both industrial and
domestic).
Tax in Alberta is very low. Corporation tax in Alberta is 10 per cent compared to 15 per
cent at the Federal level. Similarly, there is no sales tax in Alberta but five per cent at the
Federal level.
There is lots of innovation in the oil and gas extraction industry. In general the oil and
gas industry has moved on significantly over the last century. It is much more high tech
today. This helps to improve efficiency through managing complexity. One specific
example is the use of big data which to improve resource extraction.
There is also a focus on moving fossil fuel resources into reserves. In the shale context,
this involves technology changes to allow both light and heavy crude oils to be fracked.
In the oil sands context, mining technologies are maturing. There is now a move
towards in situ production (steam assisted gravity drainage). This is going to overtake

mining. This development is an economic reality rather than an aesthetic reality. It has
developed to reflect a financial regime rather than a geological basis. The in situ
method of extracting oil sands has taken off because the technology has developed
enough over the last decade to make it economically viable.
Sandra Locke
Sandra Locke, Assistant Deputy Minister, Electricity and Sustainable Energy Division,
Alberta Department of Energy outlined Albertas climate change policies and its work on
CCS.
Alberta is an energy exporter. They recognise that their export markets are looking for
and demanding cleaner sources of energy (especially when it comes to oil sands). CCS
is, therefore, very important to them and acts as an important incentive.
Alberta is the first jurisdiction to put a limit on greenhouse gas emissions (Climate
Change and Emissions Management Act).
Alberta also has a carbon tax set at $15 a tonne. There is no internal mechanism for
revising the price. The price is only changed when the regulation is up for review. The
money raised from the tax is hypothecated and put into a technology fund. The
Climate Change and Emissions Management Corporation takes this money and invests
it in cutting edge technology development to achieve carbon reductions. The funds
have to be used in, or have a benefit to, Alberta. These funds don't apply to energy
efficiency in buildings. Energy efficiency in buildings is driven by regulations.
In Alberta the biggest source of emissions comes from the industrial sector. The
Provincial Governments target is to reduce emissions from this sector by 70 per cent
through the deployment of CCS. There have, however, been a lot has changes since it
was first formulated in 2008. There will have to be another review (to be completed by
September 2014). It is likely that the target will be downgraded slightly to between 50
per cent and 70 per cent.
The main focus of the Governments efforts is on reducing the carbon intensity of oil
sands. Other industrial applications (cement and steel etc) are still some time away
from CCS. They are looking at what the Federal Government wants to do about CCS
on the industrial sector. In theory it is likely that these sites (roughly 100 including non-
industrial) will have to apply CCS.
Alberta's CCS program objectives include: demonstrating CCS at a large scale, building
on public confidence, helping to reduce Alberta's emissions, develop a world class
regulatory program and make links us with the UK to help them achieve this as well.
With regard to funding CCS projects, funding was able to advance very quickly. Mostly
because of their funding principles which were clearly defined and include:
Government contributions cannot exceed 75% of the incremental cost of CCS.

Funding paid out in three stages: project development and construction 40%
(refundable to government if project isn't completed - there is no spend it or lose it
mechanism - built into initial deal so the project developers where they stand), 20%
as a bonus for doing what you said you would, and 40% when the company starts
operating, capturing and storing carbon.
Funding paid out over ten years. After that the project developer no longer has any
commitments to the government. But there is an expectation there will still be a
commitment to ongoing regulatory requirements.
No funding paid until contracts are in place.
Government will bear the risk of providing funding, the policy risk and the expectation
that the carbon price will be high enough to make the business case for CCS, and long
term liability of storing the carbon dioxide underground.
The Government didnt get involved in technology choices. It was indifferent on the
type of storage technology the project developers used.
There were some notable differences between the UK and Canada on their respective
CCS funding approaches. Canada decided that is wasn't preparedness to take on cost
risk. Unlike the UK it could, therefore, skim over these issues. If taking on cost risk then
have to get into these issues. Slows things down. Also for the time being not getting into
electricity based CCS. In a market based system it is very difficult to get CCS off the
ground. Recognise that it is more difficult.
Mike Fernandez
Mike Fernandez, Executive director, Sustainable Energy Branch, Government of Alberta
outlined information about what the Albertan Government was doing on CCS.
The Albertan Government has taken a leadership role in CCS. However it doesn't want
to make its industry uncompetitive. So waiting to see what the rest of the work will do.
Its 50 per cent future target for CCS suggests a pipeline of projects. Expectation is that it
will be a commercial technology which will be adopted for commercial decisions.
Regarding regulatory environment for management of storing carbon dioxide, in 2008
Alberta established regulations for taking long term liability. Companies have to apply
forby satisfying technical requirementsa closure certificate which absolves them of
responsibility for storing the carbon. There is also a post-closure stewardship fund.
This money goes in the bank and is available to the Alberta Government to use for
monitoring and managing risks etc.
They believe that the UK Government will have to take the decision to take long term
liability for storage. It is a deal beaker for most companies. This is, however, specifically
for saline aquifers not enhanced oil recovery (EOR). Companies take liability for
commercial ventures such as EOR.

Alberta has a very close relationship with UK on CCS going back at least five years.
In terms of the lessons learnt for the UK. UK has come a long way but it has also lost a
lot of time by agreeing to fund its CCS alongside EU funding streams. They believe that
the UK needs to realise that UK has to go it alone. They believe that HM Treasury has a
lot of influence. But this is also the case in Alberta and they were still able to enshrine
money in legislation giving minister ability to sign $2bn worth of checks. The 2009
legislation removes the money from general revenue. The money is protected. Only a
specific Minister is able to spend the money.
Alberta still has $700 million left to spend. This won't expire because it is enshrined in
legislation. But Albertas Premier wants to learn from current projects and see what
international community does. However, currently no political appetite (or motivation)
to spend more money. Likely future funding for CCS in future is the expected to come
from increases in the cost of carbon and how much that price applies to a plants
emissions. In addition there is an expectation that the cost of CCS will come down - i.e.
Get more bang for buck.
Norway has done the right thing. It originally took too much contract liability but has
now reduced that liability. He still thinks they will see CCS in Norway.
Honourable Cal Dallas
Honourable Cal Dallas, Minister for International and Intergovernmental Affairs,
Government of Alberta gave a high level overview of CCS and the wider energy landscape in
Alberta.
Alberta has the third largest oil reserves in the world. There is a mismatch between the
amount of oil sands and carbon savings needed. Recognise the need to reduce
emissions and therefore CCS technologies are important. Enhanced oil recovery could
be useful in order to ensure they can maximise resource recovery. They would like to
sell technologies made in Alberta abroad.
As a landlocked jurisdiction, Alberta has a huge challenge getting its fossil fuel products
to the coast and therefore diversify its market. The Albertan Premier is looking at how
they can maximise selling its resources. There are currently two important projects in
this regard; the Northern Gateway and the West to East Pipeline. To make these
projects a reality requires an important dialogue between First Nations, municipalities
and other provinces. The highest profile project is the Keystone XL project. They are
currently looking for Presidential agreement in the United States. If successful, this
pipeline would pipe Canadian product to Texas which has demand for it. There is,
however, a difficulty in justifying selling oil sands because of the high carbon content.
Reducing the carbon intensity of oil sands will be key to winning the argument of
justifying selling the product to America.
There is a strange relationship between the Federal and Provincial Governments. There
are issues around where responsibility lies. There are constitutional boundaries,

competencies and sometimes just differing opinions. Ultimately, the Provincial
Government owns the resources and is responsible for regulation of oil and gas
extraction with an independent regulator.
Alberta has made some sweeping changes to these regulations. Countries around the
world are coming to Alberta to see how they can develop similar regulations. This fits
in with Albertas desire to have a global impact.
The Federal Government has developed regulations which will effect greenhouse gas
emissions from coal fired power stations. This will have significant future implications
for coal fired generation. The dialogue on production of these regulations were
productive. There were some issues but they were able to overcome them. Alberta
believes that the Federal Government needs, however, to be mindful of competitiveness
issues. Thinks that Alberta's financial and regulatory regime which is stable and
predictable needs to be protected because it was that which has attracted investment
and provided certainty. When interacting with the Federal Government they try to start
from the perspective that there is a mutual desire to reduce emissions and then look to
see whether they can go from there.
The Albertan Government expects oil sand development to develop rapidly and faster
than anywhere else. The emissions reduction trajectory and reliance on CCS is
important and makes the need for a long term role out of CCS very important. The
upfront funding provided by the Provincial Government to the Shell Quest project was
designed to develop first of a kind projects which can help the technology progress
along the technology curve and reduce costs. The Government would then prefer to
leave it to the market. The future of CCS is, however, uncertain but they are optimistic
that CCS will succeed if there is a sharing of learning.
Lunch discussion with Michael Moore, Area Director, Energy & Environmental Policy,
Bev Dahlby, Distinguished Fellow, and Dan McFadyen, Executive Fellow from the School
of Public Policy at the University of Calgary; and Gianna Manes, President and CEO of
Enmax.
Stephen Larter, Don Lawton, Richard Adamson and Stefan Bachu, Paul
Clark and Brent Lakeman
Stephen Larter, Scientific Director, Richard Adamson, Managing Director, and Don Lawton,
Research Theme Leader of Carbon Management Canada outlined the work of their
organisation. Stefan Bachu, Distinguished Scientist, Paul Clark, President and Chief
Visioneer and Brent Lakeman, General Manager of Alberta Innovates outlined the work of
their organization.
Challenge for the UK is developing off-shore storage.
Onshore v. Offshore: Offshore has the advantage of being away from populated areas
but is more expensive because it is harder to get to storage sites and platforms in the sea
are required.

There is a window of opportunity for the UK as operational oil-fields reach the end of
life and could be converted instead of decommissioned.
UK should direct research efforts towards monitoring/developing off-shore
opportunities.
Research is needed into more complex CO
2
storage sites. Existing projects have tended
to cherry-pick the best sites (for example those with no old wells nearby that would risk
compromising the storage site).
A robust regulatory framework is important to provide certainty which will encourage
investment/involvement by industry.
Honourable Thomas Lukaszuk
Honourable Thomas Lukaszuk, Deputy Premier of Alberta, Government of Alberta gave a
high level overview of energy policy in Alberta.
CCS is a very important component of Albertas energy sector. It is an important
feedstock and spin-off from electricity production. CCS is also being driven by
acceptability of carbon content of its products in international markets as well as
recognition of the need to address climate change.
Good geology and a sparse population makes Alberta suited to storing carbon dioxide.
The population at large finds it acceptable although some NGOs are against it. The
Main concern is that there will always be a risk of carbon leakage and contamination.
On the whole, though, Alberta believes that it has a social licence to operate CCS.
It is important that third parties are involved in establishing baselines and verify stored
carbon. Any organisation which is funded by Government is perceived to be bias and
therefore disqualifies them.
The issue of the social licence also holds true for oil and gas companies in general. Over
the last ten years there has been a seismic shift in their recognition that they need a
social licence to operate. This includes being collaborating with government and again
use third parties to verify what they are doing. Industry has realised that they have to be
much more sophisticated about what they are doing.
Alberta is one of the only provinces to have put a price on carbon. The oil and gas
industry is in favour of sitting around the table and discussing a significant increase in
the carbon levy. It agrees with paying as long as the money stays within the jurisdiction
and is fed into innovation which could spark new forms of revenue in the future. There
is also a recognition that Albertans fuel bills will rise as a result of the tax.
The oil and gas industry have also already proven that captured carbon can act as a new
feed stock for other industries (e.g. production of fertiliser in agriculture). These other
industries are looking to relocate as a result. A big challenge remains in actually moving

the carbon around. Building new pipelines is a very expensive investment but activity is
starting to occur.
Current business analysis shows there will be a significant uptake of CCS. Factors
which will influence this, however, are what will be the price of the feedstock (carbon).
There is a great deal of interest. They will need to watch to see what the price of carbon
will be because this will affect the viability of the technology. This is important. This
will, however, need to be offset against the cost of construction is higher because of a
shortage of labour.
John Rind
John Rind, Vice President of operations for heavy operations (oil sands), Shell gave an
overview of Shells oil sands business and how it was applying CCS to it.
Shell Canadas up-stream business owns the Athabasca oil sands (in situ) project as well
as Peace River assets and Orion Project near Cold Lake. It also has leases in Grosmont,
located on the far west side of the Athabasca area. These projects have high carbon
content compared to conventional oil projects. Shell has to upgrade the heavy oil at a
refinery at the Scotford Upgrader. Shells Quest project will capture the carbon dioxide
emissions associated with these activities.
Shells Quest project is a joint venture between Shell (60%), Chevron (20%) and
Marathon (20%). It is a fully integrated first of a kind project in Canada and in the oil
sands business. It will capture a million tonnes of carbon dioxide per year with 25 years
capacity.
Shells oil sands business didn't start until 1965. It was a precursor to Sun Core which
started the first facility. Wanted to prove the technology in place. Sun Core started in
1973. It wanted to prove that you could reliably make a barrel of oil. There was no
substantial investment up to early 1980s. The main focus was to demonstrate the
technology. The amount of energy needed was cut at least in half which reduced
environmental impact as well as improved the economic case. Investments were made
through 1990s into early 2000s including from shell. There was a focus on heat
integration and improving the performance of the assets. Protecting the environment
was not the driving force behind the improvements made. As the technology developed
and became a larger and larger part of the Canadian economy, the industry realised
that environmental performance was not where it needed to be. Being frank there is
still a long way to go. Continually trying to reduce environment al impact.
There is a Canadian Innovation Oil Sands Alliance. This group shares intellectual
property on technology which helps to improve environmental performance.
The initial drivers to improve environmental performance were external to the
province and external to Canada, primarily out of European Union and the United
States. In last 7-8 years, there has also been pressure from within Canada. Canadas
citizens have been concerned about environmental footprint of oil sands. Oil sands

production has increased significantly so there's has been significant push back from
the general public on what they are doing. Public acceptance has improved because
they have been very transparent, improved their environmental performance, and done
what they said they were going to do.
The Canadian Government understands that oil sands are an important economic
driver.
Reception hosted by British Consul General Calgary with government, academic and
industry leaders.
22 November 2013
Tour of Shells Quest CCS project.

Formal Minutes
Tuesday 13 May 2014
Members present:
Mr Tim Yeo, in the Chair
Ian Lavery
Dr Phillip Lee
Mr Peter Lilley
Albert Owen
John Robertson
Sir Robert Smith
Graham Stringer
Dr Alan Whitehead
Draft Report (Carbon capture and storage), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 75 read and agreed to.
Annex and Summary agreed to.
Resolved, That the Report be the Ninth Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of
Standing Order No. 134.
[Adjourned till Wednesday 11 June at 9.00 am

Witnesses
The following witnesses gave evidence. Transcripts can be viewed on the Committees
inquiry page at http://www.parliament.uk/business/committees/committees-a-z/commons-
select/energy-and-climate-change-committee/inquiries/parliament-2010/carbon-capture-
storage/?type=Oral#pnlPublicationFilter.
Tuesday 15 October 2013 Question number
Luke Warren, Carbon Capture & Storage Association, Professor Stuart
Haszeldine, Scottish Carbon Capture and Storage, Chris Littlecott, E3G, and
Dr Ward Goldthorpe, The Crown Estate Q1-28
Sam Gomersall, CO2DeepStore, Jane Paxman, 2Co Energy Limited, Bill
Spence, Shell International Limited, Richard Simon-Lewis, Capture Power,
and Jeremy Nicholson, Energy Intensive Users Group Q29-62
Thursday 23 January 2014
Professor Jon Gibbins, University of Edinburgh, and Dr David Reiner, and Dr
Jerome Neufeld, University of Cambridge Q63-83
Dr David Clarke, Energy Technologies Institute, Rodney John Allam, NET
Power, Chris Hodrien, Claverton Energy Group, and Darren Hopkins, British
Biochar Foundation Q84-102
Tuesday 4 February 2014
Michael Fallon MP, Minister of State for Energy, and Jonathan Holyoak,
Department of Energy and Climate Change Q103-172

Published written evidence
The following written evidence was received and can be viewed on the Committees
inquiry web page at http://www.parliament.uk/business/committees/committees-a-
z/commons-select/energy-and-climate-change-committee/inquiries/parliament-
2010/carbon-capture-storage/?type=Written#pnlPublicationFilter. CCS numbers are
generated by the evidence processing system and so may not be complete.
1 Basf Plc (CCS0001)
2 James Verdon et al., University of Bristol (CCS0002)
3 Simon Shackley, Dr Leslie Mabon and Benjamin Evar, University of Edinburgh
(CCS0003)
4 Chris Hodrien (CCS0004)
5 Plymouth Marine Laboratory (CCS0005)
6 Research Councils UK (CCS0006)
7 Zero Emissions Platform (Zep) (CCS0007)
8 Bbf Biochar Cic (CCS0008)
9 Resus Technology Ltd. (CCS0009)
10 UK Carbon Capture & Storage Research Centre (CCS0010)
11 The UK Advanced Power Generation Technology Forum (CCS0011)
12 Energy Technologies Institute (CCS0012)
13 Tyndall Centre for Climate Change Research, The University of Manchester (CCS0013)
14 John Midgley (CCS0016)
15 Shell International Ltd. (CCS0017)
16 The Crown Estate (CCS0019)
17 Coalimp (CCS0020)
18 Oil & Gas UK (CCS0021)
19 TUC (CCS0022)
20 Mineral Products Association (CCS0023)
21 SCCS, University of Edinburgh (CCS0024)
22 David Reiner (CCS0025)
23 International Biochar Initiative And Uk Biochar Research Centre (CCS0026)
24 Carbon Capture and Storage Association (CCS0027) (CCS0047)
25 Grantham Research Institute, LSE (CCS0028)
26 Engineering The Future (CCS0032)
27 E3G (CCS0033)
28 Rodney John Allam (CCS0034)
29 2Co Energy Ltd (CCS0035)
30 The Government Chemist (CCS0036)
31 Capture Power (CCS0037)
32 Jon Gibbins and Hannah Chalmers (CCS0038)
33 CO2DeepStore (CCS0039)
34 The Geological Society (CCS0040)
35 Tony Day (CCS0041)
36 DECC (CCS0042)

37 International Energy Agency (CCS0043)
38 Summit Power Group (CCS0046)

List of Reports from the Committee
during the current Parliament
All publications from the Committee are available on the Committees website at
www.parliament.uk/eccpublications.
The reference number of the Governments response to each Report is printed in brackets after the
HC printing number.
Session 201012
First Report Emissions Performance Standards HC 523 (807)
Second Report UK Deepwater DrillingImplications of the Gulf of
Mexico Oil Spill
HC 450 (882)
Third Report The revised draft National Policy Statements on
energy
HC 648
Fourth Report Electricity Market Reform HC 742 (1448)
Fifth Report Shale Gas HC 795 (1449)
Sixth Report Ofgems Retail Market Review HC 1046 (1544)
Seventh Report A European Supergrid HC 1040 (1684)
Eighth Report The UKs Energy Supply: Security or
Independence?
HC 1065 (1813)
Ninth Report Solar Power Feed-In Tariffs HC 1605 (1815)
Tenth Report The EU Emissions Trading System HC 1476
Eleventh Report The Future of Marine Renewables in the UK HC 1624
Twelfth Report Consumption-Based Emissions Reporting HC 1646
First Special Report Low carbon technologies in a green economy:
Government Response to the Committees Fourth
Report of Session 200910
HC 455
Second Special Report Fuel Poverty: Government Response to the
Committees Fifth Report of Session 200910
HC 541
Third Special Report The future of Britains electricity networks:
Government Response to the Committees Second
HC 629


Session 201213
First Special Report The Future of Marine Renewables in the UK:
Government Response to the Committees
Eleventh Report of Session 201012
HC 93
First Report Draft Energy Bill: Pre-legislative Scrutiny HC 275
Second Report The road to UNFCCC COP 18 and beyond HC 88
Second Special Report Consumption-Based Emissions Reporting:
Twelfth Report of Session 201012
HC 488
Third Report Low-Carbon Growth Links with China HC 529
Fourth Report Pre-appointment hearing with the Governments
preferred candidate for Chair of the Committee
on Climate Change
HC 555
Third Special Report The road to UNFCCC COP 18 and beyond:
Government Response to the Committees Second
HC 633
Fourth Special Report Low-Carbon Growth Links with China:
Government Response to the Committees Third
HC 748
Fifth Report Consumer Engagement with Energy Markets HC 554
Sixth Report
Seventh Report
Building New Nuclear: the challenges ahead
The Impact of Shale Gas on Energy Markets
HC 117
HC 785
Session 201314

First Report The Green Deal: watching brief HC 142 (HC 607)
First Special Report Building New Nuclearthe challenges ahead:
Government Response to the Committees Sixth
HC 106
Second Report A Severn Barrage? HC 194 (HC 622)
Second Special Report The Green Deal: watching brief: Government
Response to the Committees First Report of
Session 201314
HC 607
Third Special Report The Impact of Shale Gas on Energy Markets:
Seventh Report of Session 201213
HC 609
Third Report UK oil refining HC 340 (HC 718)
Fourth Report Smart meter roll-out HC 161 (HC 719)
Fifth Report Energy Prices, Profits and Poverty HC 108 (HC 717)
Sixth Report Local Energy HC 180 (HC 749)
Seventh Report Pre-appointment hearing with the Governments
preferred candidate for Chair of Ofgem
HC 645
Eighth Report Levy Control Framework HC 872

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