The chancellor is poised to announce a £20bn investment in technology to reduce Britain’s carbon emissions at next week’s budget, in a riposte to Joe Biden’s flagship Inflation Reduction Act that aims to create thousands of new jobs.
Separately, the government plans to add urgency to Britain’s nuclear programme, with a competition to develop small modular nuclear reactors (SMRs).
Jeremy Hunt will announce a “reset” of government efforts to clean up the UK’s domestic energy supply and safeguard energy security at next Wednesday’s fiscal showpiece, including efforts to create up to 50,000 highly skilled green jobs.
Hunt and the energy secretary, Grant Shapps, have been under pressure to respond to Biden’s $369bn (£306bn) of climate subsidies, which have attracted a wave of green investment to the US and away from other countries, including the UK.
Although the Treasury has sought to play down the scope for tax cuts and spending increases in the budget, better than expected figures for growth and the public finances have provided the chancellor with some additional financial scope on Wednesday.
The Treasury said Hunt plans to announce “unprecedented investment” of £20bn spread over the next two decades into carbon capture and low carbon energy projects and “commit to spades in the ground on these projects from next year”.
Carbon capture and storage is the process of capturing carbon dioxide emissions from industrial activity such as steel and cement production, transporting it, and then locking it into underground storage sites.
The move will comes as a relief to developers of a string of carbon capture projects, which have been awaiting government approval. These include the Acorn CCS project designed to support the decarbonisation of two St Fergus gas terminals in Aberdeenshire, and Viking CCS, a 34-mile pipeline that will take carbon from industrial sites on Humberside and lock it under the North Sea.
The government hopes to store 20-30m tonnes of CO2 a year by 2030, equal to the emissions from 10-15m cars. Britain has set a legal target to reach net zero carbon emissions by 2050.
Its attempts to build new UK nuclear power capacity have been beset by a series of false starts including delays and overruns to construction of new plants at Hinkley Point C in Somerset and a lengthy process in finding funding for the proposed Sizewell C power station in Suffolk.
On Friday, the government said that Great British Nuclear, its newly formed delivery vehicle for nuclear projects, would run a competition to develop SMRs.
The government is investing £210m into the Rolls-Royce SMR project, which has been matched by private sector funding.
Rolls-Royce’s reactor design is now being assessed by the safety regulator, the Office for Nuclear Regulation. However, the government has faced criticism from the nuclear industry at the pace of its decision around SMRs.
Britain’s energy system has been under the spotlight since household bills began to rise sharply in late 2021, with further hefty increases after Russia’s invasion of Ukraine in February 2022.
The government was forced to step in to subsidise bills last year, and Hunt is next week expected to U-turn on a decision to cut support for bills from April. He is thought likely to extend support until July.
Hunt said: “We don’t want to see high bills like this again, it’s time for a clean energy reset. That is why we are fully committing to nuclear power in the UK, backing a new generation of small modular reactors, and investing tens of billions in clean energy through carbon capture.”
The energy security secretary, Grant Shapps, said: “Already a global leader in offshore wind power, we now want to do the same for the UK’s nuclear and carbon capture industries, which in turn will help cut the wholesale electricity prices to among the lowest in Europe.”