Rachel Reeves is paving the way for a multibillion-pound increase in public-sector investment at the budget after the government announced plans to commit almost £22bn over 25 years to fund carbon capture and storage projects.
In what is expected to be one of the biggest green spending promises of the parliament, the chancellor, prime minister and the energy secretary, Ed Miliband, will unveil the details on a visit to the Liverpool city region on Friday declaring a “new era” for clean energy jobs.
With less than a month before the 30 October budget, Reeves said the announcement would come as one of a “drumbeat” of measures to kickstart economic growth.
The government hopes the investment will reignite Britain’s struggling heavy industry by funding two major carbon capture and storage (CCS) clusters; one in Teesside in north east England, and a second in north-west England and north Wales.
The technology is controversial because it has never been used at commercial scale in the UK before, while environmental campaigners have warned big energy firms could use it to extend the life of their fossil fuel assets.
Greenpeace said there was a danger the government was “locking ourselves into second-rate solutions”.
However, ministers and officials expect it to play a major role in the government’s climate ambitions as a vital way to reach net zero.
The prime minister will say the commitment had helped to bring in an expected £8bn of private investment by some of the world’s biggest energy companies, including BP and Norwegian energy company Equinor.
Reeves’ comments come after she hinted in her speech to Labour’s party conference in Liverpool last week that she would change the government’s fiscal rules to allow billions of pounds more in capital spending.
“We’ll set out details of the fiscal rules at the budget, but we have got to make sure we unlock that space for capital investment,” she told journalists ahead of Friday’s announcement.
Friday’s announcement comes amid fears of a fresh energy price shock triggered by an escalating Middle East conflict.
Reeves issued a warning that Britain would not be immune to the fallout from spiralling oil prices, which rose 5% on Thursday, although cautioned that the response so far on financial markets had been muted.
“There’s a risk both on inflation and on GDP. It’s something we’ll keep a close eye on .”
Carbon capture technology works by trapping emissions from power plants or factories before the emissions enter the atmosphere and contribute to the climate crisis. The emissions will be transported via gas pipes to be stored beneath the seabed.
Keir Starmer said: “Today’s announcement will give industry the certainty it needs – committing to 25 years of funding in this groundbreaking technology – to help deliver jobs, kickstart growth, and repair this country once and for all.”
Officials expect the projects to attract private sector investment of about £8bn while…
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