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Greenhouse Gas Removal (GGR) Policy Options – Final Report

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Greenhouse Gas Removal (GGR) Policy Options – Final Report Greenhouse Gas Removal (GGR) policy options – Final Report Report prepared for BEIS Final June 2019 Greenhouse Gas Removal (GGR) policy options – Final Report Contents Executive Summary ........................................................................................................................... 4 Introduction ....................................................................................................................................... 7 1 Scale and cost of future Greenhouse Gas Removal ........................................................................... 9 2 The need for a policy portfolio to support GGRs ............................................................................. 17 3 Review of current GGR policies ....................................................................................................... 22 4 Policy pathways to support GGR ..................................................................................................... 25 5 Enabling and integrating policies ..................................................................................................... 41 6 Frequently Asked Questions ............................................................................................................ 50 7 References ....................................................................................................................................... 52 8 Appendix: Assessment of direct policies ......................................................................................... 56 List of tables Table 1 Overview of GGR options considered .............................................................................................. 12 Table 2 Indicative costs of GGR .................................................................................................................... 14 Table 3 Policy taxonomy ............................................................................................................................. 19 Table 4 Summary of selected policy pathways ............................................................................................ 20 Table 5 Evolutionary pathway strengths and weaknesses .......................................................................... 29 Table 6 Obligation scheme pathway strengths and weaknesses ................................................................ 31 Table 7 Tax credit pathway strengths and weaknesses ............................................................................... 35 Table 8 Subsidies scheme pathway strengths and weaknesses .................................................................. 38 Table 9 GGR accounting practices ................................................................................................................ 43 Table 10 Score overview ................................................................................................................................ 58 Table 11 Scoring notes ................................................................................................................................... 60 List of figures Figure 1 Indicative phases for GGR policy ....................................................................................................... 5 Figure 2 Archetypes for GGR policy support ................................................................................................... 5 Figure 3 Indicative roll-out of GGR in the UK ................................................................................................. 10 Figure 4 Annual costs of total GGR deployment............................................................................................ 15 Figure 5 2017 sectoral gross value added (GVA) versus annual costs of related GGRs in 2050 .................... 16 Figure 6 Indicative phases for GGR policy ..................................................................................................... 25 Figure 7 Obligation scheme implementation timeline ................................................................................. 32 Figure 8 Revenue-neutral levy rates on carbon emissions to fully fund GGR tax credits .............................. 35 Figure 9 Tax credit scheme implementation timeline ................................................................................... 36 Figure 10 Subsidies scheme implementation timeline .................................................................................... 39 2 Greenhouse Gas Removal (GGR) policy options – Final Report List of boxes Box 1 Key takeaways ................................................................................................................................... 9 Box 2 GGR rollout scenario ....................................................................................................................... 10 Box 3 The negative emissions potential of individual GGR options remains uncertain ............................ 11 Box 4 Percentage of costs passed through to consumers ......................................................................... 16 Box 5 Key takeaways ................................................................................................................................. 17 Box 6 A parallel negative emissions trading system, rather than inclusion in the ETS .............................. 31 Box 7 The level of tax credits and levy required ........................................................................................ 34 Box 8 Challenges to GGR project accounting ............................................................................................ 42 Box 9 Devolution and GGR policy .............................................................................................................. 47 Box 10 BECCS and DACCS in an ETS ............................................................................................................. 73 3 Greenhouse Gas Removal (GGR) policy options – Final Report Executive Summary Greenhouse gas removal (GGR) will become an increasingly important driver of UK decarbonisation. For the UK to reach net zero greenhouse gas (GHG) emissions around 2050, approximately 130 MtCO2 of negative emissions could be required annually (Royal Society & Royal Academy of Engineering, 2018). The need for GGR at scale is driven by remaining emissions from three ‘hard-to-treat’ sectors: aviation, agriculture, and industry. Abatement of emissions from these sectors is expensive and requires significant technological breakthroughs. GGR is required to compensate. BECCS and DACCS are expected to be the two key GGR options (in terms of tCO2 removed), complemented by smaller, yet vital, deployment of land-based GGRs. Large-scale investment will be required for industrial GGRs such as bioenergy with carbon capture and storage (BECCS) and direct air carbon capture and storage (DACCS). The rate of roll-out will need to be rapid, particularly in the 2030s and 2040s and will require significant policy support. To achieve the expected level of negative emissions from land-based solutions, large areas of UK land will need to be afforested, and a large proportion of UK farmers may need to implement measures to sequester carbon, such as agroforestry, biochar, or enhanced weathering. GGRs present policymakers with opportunities to meet a range of other sustainable development goals such as halting biodiversity loss and reversing land degradation. However, there are also policy challenges and policy needs to address: 1. Costs: GGR at scale will require multiple £ billions per annum. At this scale, the distribution of GGR costs will require careful consideration whether funded through general taxation, specific levies, or obligations on the private sector. Notably, costs are likely to be of a similar scale to current government spending on renewable energy support. Hence, there is precedent for government climate funding at the required scale. 2. Project accounting: Quantifying negative emissions transparently and robustly is a key enabler for linking GGR incentives to performance. A key challenge for GGR reporting (not faced in emissions reporting) is the permanence of the removed CO2. For some GGRs, such as afforestation, there are established methodologies. For BECCS and DACCS, significant work is still required to establish the appropriate (administrative) frameworks, although in principle this could be relatively simple. Land- and soil-based GGRs, such as biochar, present the greatest challenge as both the t/CO2 that can be removed and the storage permanence are uncertain, and whereas national inventory reporting and accounting can cope with project failure the value of individual projects may be unacceptably uncertain. 3. Uncertainty: Given the technological immaturity of most GGRs, significant uncertainty remains around key GGR options. For example, enhanced weathering, which by some estimates could represent around 15% of UK GGR by 2050, has large uncertainties around cost (£39-£390 per tCO2) and there are possible environmental impacts. As the need for GGR is clear, but the GGR methods offering greatest natural capital benefit are not yet known, policy flexibility will be required. 4. Policy interactions: GGR deployment will directly affect power, industry, and agriculture. This requires coordination across heterogenous sectors and government departments. Two key policy interactions stand out: firstly, GGR deployment will have significant implications
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