CCUS requires long-term certainty and market-driven incentives
Recent news reports suggest the UK government is considering reductions in CCUS funding, raising concerns about the long-term stability of its state-led subsidy model for industrial decarbonisation. While public funding has played a crucial role in kickstarting CCUS, the UK’s approach, built around grants and government contracts, has left the sector vulnerable to budget fluctuations and shifting political priorities.
By contrast, the US 45Q tax credit system provides predictable, performance-based incentives that encourage private investment in CCUS. Instead of relying on government grants that can be cut or delayed, 45Q directly rewards CO₂ captured and stored, making CCUS projects financially viable without ongoing political intervention. The US model has spurred billions in private investment, while the UK’s approach risks stagnation due to uncertain government support.
The challenge for policymakers is clear: CCUS requires long-term certainty, and market-driven incentives like credits are far more resilient than short-term public funding. Canada’s Alberta province, for example, is combining carbon pricing, investment tax credits and Clean Fuel Regulations credits, creating a system where incentives exceed 45Q by 2030.
No government subsidy is ever guaranteed in the long term. While the Inflation Reduction Act (IRA) significantly expanded CCUS tax incentives, a Trump administration could amend or repeal parts of the law. However, some experts believe that key Republican-backed provisions—such as 45Q and energy sector incentives—are likely to remain, reflecting the broader market appeal of tax-based climate policy over direct subsidies.
If the UK wants to remain competitive in industrial decarbonisation and CCUS, it should rethink its reliance on subsidy-driven policy and shift towards market-based mechanisms that attract private capital and ensure long-term stability.
What do you think? Should the UK follow the US and Canada in moving towards tax-based CCUS incentives? Let’s discuss
