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Who pays for greenhouse gas removal in the UK? Designing equitable policy to fund BECCS and DACCS

Greenhouse gas removal (GGR) technologies, such as bioenergy with carbon capture and storage (BECCS) and direct air carbon capture and storage (DACCS), are expected to play an important part in the UK’s transition to net zero. However, there is a lack of clarity over how these technologies would be funded and who would bear the cost.

This brief examines four policy options for funding greenhouse gas removal technologies and assesses their distributional impact – i.e. how the costs fall to UK households across income levels. This provides novel detail for policymakers to support the equitable and effective design of GGR funding policy.

Main messages

  • The UK’s net zero commitment assumes the use of GGR technologies such as BECCS and DACCS, but there is a risk that the costs of funding them will be unequally distributed across society.
  • Given evidence that suggests the public see BECCS and DACCS as controversial technologies, choosing a fair funding model is vital to ensure public legitimacy.
  • Income tax is found to be the most progressive policy option for funding BECCS and DACCS. The three other options assessed – polluter pays, carbon contracts for difference and multi-sector government contracts – result in regressive outcomes, meaning that low-income households pay disproportionately more than higher-income households.
  • Carbon contracts for difference, the option which most closely resembles current UK government policy for supporting low-carbon energy generation, is the most regressive policy. It would fund BECCS and DACCS through household energy bills and further entrench inequality as low-income households spend a disproportionately large share of income on electricity.
  • Aviation is an important sector for intervention. As high-income households have larger aviation carbon footprints, passing on costs via air travel could help to fund GGR technologies while having minimal impacts on social welfare.

This policy brief is based on an article published by the same authors in the journal Climate Policy. Access the article here: https://www.lse.ac.uk/granthaminstitute/publication/who-pays-for-beccs-and-daccs-in-the-uk-designing-equitable-climate-policy/