Economic Report 2020

ECONOMIC REPORT 2020

Investment support for decarbonisation

question and could push associated investments and activities overseas. This is an issue which is also present in the oil and gas production sector. The OGA’s Energy Integration Project demonstrated that, even at high carbon prices, there is likely to be a funding shortfall in order for a generic electrification project to break even in an economic appraisal. Investment support is therefore an important element of a functioning decarbonisation policy. For example, the EU has already established an “Innovation Fund” of €10 billion. The UK government has also suggested that a decarbonisation fund of £2 billion could be established once the UK emission scheme is up and running in 2021. Schemes of this type will be an essential ingredient to support lowering emissions from industry.

Carbon prices are expected to progressively increase in the coming years as a result of the tightening of the EU Emission Trading Scheme. The Commission is about to consult on increasing the 2030 emissions target reduction from 40 per cent to 55 per cent compared with 1990 levels. This will further restrict the quantity of certificates available. This could be expected to filter through, either directly or indirectly, into UK carbon prices and will act as an incentive to continue to drive operational improvements across all industries. However, complementary polices are needed to drive real step-change reductions in emissions. Many emissions reduction projects would require carbon prices well in excess of projected levels to be economic. Yet simply increasing the carbon price to such levels would threaten the entire viability of the industries in

Power generation

Source

Capture CO 2

Transport

Storage

Industrial sources

Reservoir development and management

Offshore export of CO 2

Hydrogen production H

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