How is Planned Public Investment to Enable CCS Likely to Impact the Wider UK Economy

Abstract

The UK has made a binding commitment to reach net zero emissions by 2050 and Carbon Capture and Storage (CCS) is seen as a key component of getting there. In the March 2020 spring budget statement the UK Government committed a minimum spending of £800million to promote the development of CCS and help address the concerns regarding the cost of CCS. Here we find that a Government investment of £1.75billion in critical CO2 transport and storage infrastructure over a 6 year period can be an effective stimulus to the economy while importantly laying the foundations for reducing emissions from key industries over the coming decades. Ultimately, the cumulative 30-year GDP boost associated with the investment equates to around £0.2million of cumulative GDP per £million spent in a time frame up to 2026. Importantly given current COVID -19 related circumstances, the investment can lead to the almost immediate creation of thousands jobs in a number of sectors. Over a 6 year period the job creation associated with the expansion leads to an additional 3,850 full-time equivalent (FTE) jobs in the first year, between 2,250 and 2,670 additional FTE jobs in each of the subsequent 4 years, and 1,700 in 2026. The societal return is the transitory creation of one additional job per £1million spend in the 6 year time frame. As is common with any large public investment, consideration should be given to the subsequent effects on prices and exports which may be constrained as a result. Beyond our analysis, a key question remains how a large-scale operational CCS sector can constitute a fiscally and economically sustainable return to public and private sector investments. Could CCS provide a sustained financial contribution by helping to sustain industrial activity, maintain employment, minimises potential losses in productivity, and prevent offshoring of industries, emissions and jobs while crucially allowing key industries to reduce their emissions in line with targets set out in UK law?