Policy trade-offs in introducing a CO2 transport and storage industry to service the UK's regional manufacturing clusters

Government and industry in oil and gas producing nations are increasingly considering development of carbon capture and storage (CCS) as both a deep emissions reduction solution and route to transitioning extraction supply chains. We develop a computable general equilibrium model of the UK economy to investigate the economy-wide impacts of introducing a new carbon dioxide (CO2) transport and storage sector supplying national capacity to support decarbonisation of four of the main mainland industrial clusters, located in the North England and Scotland. We consider key issues including the implications of the new sector's infrastructure intensity and the need for both upfront investment and action to guarantee demand for the initial capacity. We examine the challenges of funding the sector, particularly the UK Government's stated preference to move to a ‘polluter pays’ approach in the medium term. We find that such an additional cost burden could impact the international competitiveness of industries concentrated in the four regional clusters, with consequent offshoring of industry demand and activity. The associated job losses bring potential conflicts with the UK Government's regional ‘levelling up’ agenda, triggering reconsideration of what policymakers should anticipate in terms of the ‘green growth' potential of CCS in an industrial decarbonisation context.