The UK government has cut £200m ($266m) in capital grants for carbon capture, usage and storage (CCUS), leaving Scotland’s Acorn project without a confirmed grant funding commitment and raising fresh questions over its development.
The Budget, published on 28 October, also outlined £500m ($665m) in savings from hydrogen as the Department for Energy Security and Net Zero (DESNZ) reprioritises spending to contribute towards the government’s Defence Investment Plan.
Acorn was not named among the projects retaining grant funding. Instead, the government said it was “actively looking at how loan or equity investments can support the continued development of future CCUS and hydrogen projects this Parliament, including for the Acorn Cluster”.
No funding amount or timetable was provided for the Scottish project.
Russell Borthwick, Chief Executive of Aberdeen & Grampian Chamber of Commerce, described the decision as a “hammer blow” for the north-east Scotland economy, according to the Herald.
The project, based at St Fergus near Peterhead, aims to capture carbon dioxide (CO2) from industrial facilities and power plants before transporting it offshore for permanent storage in depleted gas fields beneath the North Sea.
It plans to reuse existing oil and gas infrastructure, including pipelines connecting the St Fergus terminal with offshore sites. The project is intended to help establish Scotland as a carbon storage hub, supporting the decarbonisation of industrial emissions and the development of wider CO2 transport and storage networks.
Acorn previously missed out on government backing in 2021, when support was awarded to projects in northern England. It was subsequently placed on the reserve list for a second phase of the UK’s CCUS cluster programme.
In 2025, then energy secretary Ed Miliband indicated that £200m would be provided to progress the scheme, according to the Herald. The Budget has now left that previously indicated grant commitment without confirmation, although alternative financing remains under consideration.
Carbon capture funding reprioritised
The government said it would maintain grant funding for the Viking cluster in the Humber, while prioritising the delivery of more mature CCUS and hydrogen projects in Teesside, Merseyside and North Wales.
The savings form part of a wider DESNZ budget reprioritisation. The government said it was considering loans or equity investments for future CCUS and hydrogen projects, while seeking to ensure a return for taxpayers.
Speaking after the Budget, Energy Secretary Douglas Alexander said there were “significant challenges” surrounding Acorn, including the market readiness of the technology and the commercial arrangements for the project.
He said the government had a responsibility to consider the use of public money carefully while continuing to facilitate the transition in the North Sea, adding that projects were being assessed on a case-by-case basis.
The decision leaves Acorn dependent on whether an alternative funding arrangement can be agreed, with no confirmed timetable for the next stage of development.
The Budget also outlined £500m ($665m) in savings from hydrogen as part of the wider spending reprioritisation.
The government said up to £300m ($399m) could be made available for strategically important hydrogen projects, subject to affordability and value-for-money assessments. It will also fund committed Hydrogen Allocation Round 1 contracts through public spending rather than the planned levy on gas bills.
The Budget does not specify which hydrogen programmes account for the £500m saving, or explicitly state that the separate £500m commitment previously announced for hydrogen transport and storage infrastructure has been cancelled.
