Submission to the BEIS consultation on business models for greenhouse gas removals
This report consists of a written submission to the UK Government’s Department for Business, Energy and Industrial Strategy (BEIS) July 2022 consultation on proposals for business models to support the deployment of engineered greenhouse gas removal (GGR) projects.
This submission answers questions on the rationale for developing business models for GGRs, contract schemes for negative emissions and market frameworks for supporting GGR projects.
Key messages for policymakers
- If the UK is to build a diverse and large-scale portfolio of greenhouse gas removal (GGR) technologies, direct government support will be required in the short to medium term. This would drive currently expensive, yet highly scalable, technological GGR down the cost curve.
- A technology-neutral approach to GGR policy could lead to poor substitutability between GGR and conventional climate mitigation measures, masking important differences between nature-based and engineered GGR techniques, such as the duration of carbon storage and their co-benefits.
- Depending on how the costs of GGR policy are recovered, there is a risk of socially regressive impacts, whereby the cost as a proportion of income is greater for low-income groups than for higher-income groups. In particular, funding GGR through energy bills would entrench existing inequalities as low-income households spend a disproportionately large share of their income on electricity.
- Income tax is one progressive policy funding option, mitigating unequal distributional impacts. Funding GGR technologies through air travel can also have minimal impacts on social welfare as high-income households have larger aviation carbon footprints than lower-income households.
- Policymakers can drive voluntary demand for high-quality GGR projects by improving voluntary market governance and architecture. This includes supporting the development of carbon credit ratings and setting out a clear pathway towards regulation that enforces high standards around emissions performance claims.
- The future integration of GGR into the UK Emission Trading Scheme (ETS) poses risks for two key reasons: first, treating emissions removals and emissions reductions as entirely fungible allows for undesirable substitution; second, carbon markets may provide insufficient demand to make currently more-costly GGR techniques affordable for deployment at commercial scales.