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UK Government scraps £1bn fund linked to Scots carbon capture project

The Shell and SSE-backed development in Peterhead was considered the scheme's front runner.

Goldeneye: Platform would have been involved in carbon capture scheme.
Goldeneye: Platform would have been involved in carbon capture scheme. © STV

The UK Government has scrapped a £1bn fund which could have been used to develop a cutting edge carbon capture and storage facility in Scotland. 

Two projects were in the running for the funding, a Shell and SSE-backed development in Peterhead and the White Rose scheme at the Drax power plant in North Yorkshire. 

The Peterhead development was widely considered the front runner in the government's Carbon Capture and Storage Competition after Drax announced plans to halt investment in White Rose earlier this year.

Up to 600 jobs would have been created during the construction phase and the project could have helped dispose of up to 15 million tonnes of harmful gasses.

But Shell said it "no longer sees a future" in the scheme after the government announced it was withdrawing funding on Wednesday.

In a statement to the London Stock Exchange, the government said: "Today, following the chancellor's Autumn Statement, the government confirms that the £1bn ring-fenced capital budget for the Carbon Capture and Storage Competition is no longer available. 

"This decision means that the competition cannot proceed on its current basis. We will engage closely with the bidders on the implications of this decision for them."

Under the plans, harmful carbon dioxide which would otherwise have been released into the atmosphere would have been captured at Peterhead Power Station and pumped 62 miles out to sea to the Goldeneye platform.

The compressed gas would then have been stored in depleted gas wells under the North Sea.

'We no longer see a future in the project'

A Shell spokesman said: "Shell is disappointed at the withdrawal of funding for the competition, in which our Peterhead project was one of the final contenders. 

"We have worked tirelessly over the last two years to progress our plans for this project. It has the potential to bring huge value to the UK, both in terms of immediate emissions reductions and developing knowledge for the benefit of a wider industry.

"Government funding to support this world-first demonstration project, through the competition, was important to achieving the aim of making the technology commercially viable in the shortest possible time.

"While we acknowledge that this decision has been made in the context of a difficult spending review, without that funding, we no longer see a future for the Peterhead project in the near term."

'Extremely disappointing'

Manufacturing body EEF warned carbon capture technology could be critical in disposing of pollution created by the steel and cement industries.

EEF's head of climate change and environment Claire Jakobsson said: "The cuts to the UK's carbon capture and storage funding are extremely disappointing. 

"Whilst we understand that Government has had to make some extremely tough decisions, this one is not in the long term interests of the UK economy or energy consumers.

"Carbon capture and storage has the potential to halve the costs of decarbonising the UK economy by 2050, which amounts to £32bn a year by 2050. 

"In choosing to save a relatively small sum of taxpayer money in 2015, the government is unnecessarily committing vast amount of future energy consumers' money."

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