UK Law and Practice Contributed by: Ruth Knox and Julian Wolfgramm-King, Paul Hastings LLP
Cluster (ECC) (Humberside and Teesside) as the track one clusters, targeting operation by the mid-2020s. In October 2024, the government announced it had made GBP21.7 billion available over 25 years to sup - port development of the track one clusters. In July 2023, DESNZ announced that the Acorn project (in north-east Scotland) and Viking project (in the Hum - ber) have been chosen as the third and fourth CCUS clusters, targeting operation by 2030. The government intends the UK CCUS sector to tran - sition to a self-sustaining, industry-led sector that requires little government intervention. The market transition will happen in three stages: • market creation (storing 20 to 30 Mt per year of CO2 by 2030); • market transition (the emergence of a commercial and competitive market up to around 2035); and • a self-sustaining CCUS market (from around 2035 onwards). GGRs The government hopes to develop a sustainable mar - ket in which engineered GGRs are funded by pollut - ing industries to compensate for their residual emis - sions. While the market is still at an early stage of development, revenue support is likely to be needed to overcome barriers to investment and incentivise large-scale deployment of the relevant technologies (particularly DACCS and BECCS). To achieve this, the government is developing the GGR business model. The model is based on the CFD scheme for renew - able electricity.
The GGR business model will use a 15-year private law contract (GGR contract) between the GGR devel - oper and a government counterparty (likely the Low Carbon Contracts Company (LCCC)). Projects will receive a price guarantee for qualifying GGR credits (a strike price), which reflects the cost of removing one tonne of CO2. The strike price will cover eligi - ble operational expenses and repayment of capital expenditure plus a rate of return on capital investment. The project will be paid a subsidy for qualifying GGR credits sold on the voluntary carbon market or per - mitted compliance markets, based on the difference between the strike price and the market value of GGR credits (the reference price). If the strike price exceeds the reference price, the counterparty will pay the dif - ference to the GGR developer. The GGR developer must pay the difference to the counterparty if the ref - erence price exceeds the strike price.
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