Making the Macroeconomic Case for Near Term Action on CCS in the UK? The Current State of Economy-wide Modelling Evidence

Turner, Karen and Race, Julia and Alabi, Oluwafisayo and Low, Ragne (2018) Making the Macroeconomic Case for Near Term Action on CCS in the UK? The Current State of Economy-wide Modelling Evidence. [Report]

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    Abstract

    Key messages: * Developing an economic narrative on the role of CCS (Carbon Capture and Storage) in the wider economy will help extend the current policy debate to involve a wider stakeholder audience – this is critical if we are to move the discussion forward. * The most compelling narrative at this stage in the UK policy context may be the ‘sustained contribution’ narrative, which focusses on the potential role of CCS in enabling the sustained contribution of sectors where we have already invested, from which we currently realise value, and from which we need to realise growing value. This relates directly to themes in the UK Industrial Strategy. * Two types of industries are particularly relevant to this narrative: the energy-using/emitting industries that may engage in CO2 capture, and the fossil fuel supplying oil and gas industry, where much of the skills, expertise and physical infrastructure that would be required to set up a CO2 transport and storage network already exist. * From our initial exploration of the evidence, we suggest that due to their capital intensity, jobs are difficult to create in CCS-relevant industries, while, due to the strength of their domestic upstream supply linkages, the loss of any one job is likely to have relatively large knock-on negative effects on other jobs. * Experimental work on price pressures suggests important but potentially very different patterns of how and by whom CCS may ultimately be ‘paid for’. Where there may be impacts on the competitiveness of high value industries in some contexts and on consumer energy bills in others, these would have very different economic and political implications.