Oxford Net Zero and Carbon Balance researchers reveal the risks of the current UK CCS policy mix and explore how a carbon storage mandate on fossil fuel producers could help the UK meet its climate targets while protecting public finances
A landmark report published today addresses a critical challenge in UK climate policy: how to develop essential carbon storage infrastructure while protecting public finances. The report, authored by researchers at Oxford Net Zero and the Carbon Balance Initiative, responds to a direct call from the government to examine long-term policy mechanisms for carbon storage deployment and the Carbon Takeback Obligation (CTBO).
Meeting the UK’s legally binding net zero target requires a rapid and significant reduction in fossil fuel use, alongside permanent geological CO2 storage of any residual CO2 production by 2050. This makes developing a robust and financially sustainable carbon capture and storage (CCS) industry essential for meeting climate targets. In 2024, the UK government committed £21.7 billion to kick-start CCS development. It has ambitions to store 50 megatonnes of CO2 annually by the mid-2030s – equivalent to the emissions from all UK power stations today. Reaching these targets will require billions in additional investment beyond current public funding commitments.
The research, developed through extensive consultation with over 20 senior stakeholders across government, academia, industry, and civil society, in collaboration with the Carbon Capture and Storage Association (CCSA), finds that current plans to rely primarily on the UK Emissions Trading Scheme to scale CCS from the 2030s are unlikely to attract sufficient private investment in carbon storage, potentially jeopardising our net zero targets and prolonging the CCS industry reliance on government subsidies beyond current funding commitments.
The authors explore an alternative policy scenario: requiring fossil fuel suppliers to permanently store a rising percentage of their CO2 emissions – such as through a Carbon Takeback Obligation. This approach could create a self-sustaining storage market while gradually reducing dependence on public funding. The authors find that storage mandates could be particularly effective if combined with complementary demand management measures such as carbon pricing.
“The new Labour government faces tough choices about public spending across many sectors,” said Mirte Boot, UK Director of Carbon Balance and report author. “Our research shows that, with the right policy design, the government could create a clear investment case for CCS and GGR without pushing the costs for CO2 clean-up onto taxpayers,” added Ingrid Sundvor, report author and Executive Director of Carbon Balance.
The authors caution that careful policy design and further research are needed, particularly to address the potential impacts and implementation challenges of any storage mandate on UK industrial competitiveness, energy security, consumer costs, and the risk of carbon leakage. The authors emphasise any carbon storage mandate would need to align with a trajectory of fossil fuel phase-out and a broader energy transition.
“The fossil fuel industry has the resources to deliver the storage capacity we need,” said Professor Myles Allen, report author and Oxford Net Zero Principal Investigator. “Making this a condition of their continued operation provides a practical pathway to net zero. Further policy development on this is urgently needed.”
Professor Stuart Haszeldine from the University of Edinburgh, who reviewed the report, added “The world heated ever-faster in 2024 – we are losing the climate fight. Commercial carbon storage has started, but models show it will need to develop 100 times faster to protect net zero. But without change, these grant-funded projects may be the last. The Government must look at a supply-side obligation that integrates the cost of CO2 storage into wholesale fossil fuel prices.”
Download the report here.
