Finance in the UK favoring fossil fuel-oriented green technologies
The UK government's focus on carbon capture, utilisation and storage (CCUS) and hydrogen projects is significantly higher compared to cleantech startups and nature projects, according to an investigation by our website.
The strategic focus on large-scale decarbonization technologies like CCUS and hydrogen is due to their critical role in reducing emissions in sectors where direct electrification is difficult, such as heavy industry, power generation, and heating. The government's 2025 Spending Review allocated £9.4 billion for CCUS capital budgets and substantial funds for hydrogen infrastructure. This investment aims for large-scale impact and industrial transformation.
Capital-intensive infrastructure investments, such as developing CCUS networks, hydrogen production, storage, and distribution, require large upfront capital investments, driving higher government spending compared to smaller-scale cleantech startups or nature-based projects. This is reflected in the emphasis on "catalytic public investment" to unlock private investment in these sectors.
The UK government frames CCUS and hydrogen as central to its Clean Energy Industries Sector Plan, aiming to harness clean energy industrial opportunities, create jobs, and secure long-term economic growth. The National Wealth Fund also prioritizes these sectors, increasing its economic capital limits to support higher-risk investments like hydrogen and CCUS projects.
However, cleantech startups and nature-based projects receive less direct government funding. Nature projects, such as biodiversity and nature-based solutions, are recognized as important within integrated sustainable infrastructure and transport plans, but their funding comes in more distributed forms rather than large individual capital allocations. Similarly, cleantech startups face competition in securing funding due to smaller scales and less immediate impact on emission hot spots.
The investigation raises questions about the transparency and effective use of public funds in the UK's net-zero agenda. The government's reporting practices are opaque, leaving investors grappling with vague data where terms like "innovation" too often include CCUS and hydrogen. Creating an enabling policy environment requires sending clear policy signals, but this has not been achieved for other emerging solutions.
Investors believe that other solutions, outside of CCUS and hydrogen, could offer better value for money in the long-run. Clear spending projections for CCUS and hydrogen are readily available, but not for other early-stage clean technologies. This uneven distribution raises questions about transparency and the effective use of finite public funds.
The oil and gas industry supports CCUS and hydrogen as they enable continued burning of fossil fuels. Cleantech VCs have expressed concerns to NZI that the UK government may be directing funds towards non-optimal areas, such as CCUS and hydrogen, at the expense of other emerging decarbonisation solutions. The investigation highlights the need for clear policy signals to support other emerging solutions in the decarbonisation process.
In the same period, the allocation for cleantech startups is around £4bn, while the UK has allocated approximately £9.8bn for CCUS and hydrogen between 2025 and 2030. This imbalance in funding reflects the UK government’s prioritization of scalable, capital-heavy technologies that are pivotal for meeting net-zero goals and industrial strategy ambitions. The distribution of funds, however, raises concerns about transparency and the effective use of finite public funds in the UK's net-zero agenda.
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