The UK government has unveiled its long-awaited Greenhouse Gas Removals (GGR) Business Model, a cornerstone of its strategy to scale carbon removal technologies and meet net-zero targets. The framework, published in August, sets out the contract terms and financial mechanisms designed to support early-stage projects, particularly those in the HyNet Track-1 expansion.
At the center of the policy is a 15-year Contract for Difference (CfD), which guarantees a revenue stream for developers of carbon removal projects. Under the scheme, developers are paid the difference between a negotiated “strike price” (based on project costs) and the market price of carbon credits. If sales exceed the strike price, developers must pay the government the difference, creating a two-way payment system.
The model also offers developers a capital grant covering up to 50% of eligible construction costs, intended to ease the financial burden of large-scale deployment, addressing the upfront costs of building out carbon removal which has been a challenge for companies in North America and Europe so far.
A Price Discovery Incentive provides an additional 5% bonus on credit sales, encouraging companies to maximize market value. Separately, transport and storage costs for captured CO2 will be reimbursed through a pass-through payment mechanism.
Turning point for carbon removal in the UK?
The policy reflects the UK’s technology-neutral approach, though only Bioenergy with Carbon Capture and Storage (BECCS) and Direct Air Carbon Capture and Storage (DACCS) projects currently qualify. Interim methodologies from the British Standards Institution will serve as the minimum quality thresholds until the full UK GGR Standard is finalized.
Analysts say the business model marks a turning point for the UK’s carbon removal sector, signaling long-term government backing. Yet challenges remain.
The CfD mechanism is more complex than direct procurement, potentially limiting access for smaller companies. Delays in establishing technical standards also risk slowing deployment, with the EU’s more flexible certification-led framework seen by some as a competitive advantage.
Carbon removals are projected to contribute only a small portion of the UK’s 2050 net zero goals in percentage terms according to a recent report by Carbon Gap but its role is vital in the long-term effort to reduce CO2 concentrations in the atmosphere.
Policymakers and industry leaders are calling the release a “critical milestone” that reflects years of collaboration between government, investors, and technical experts.
UK ETS integration also coming for carbon removal
For the UK, the new framework could accelerate investment in carbon removal at a time when scaling such technologies is considered vital for meeting climate commitments.
In July the ETS Authority announced plans to include technological carbon removal in the system by the end of 2028, targeting full operational integration by 2029.
When it was announced the Authority did clarify that the gross cap — the total number of allowances in the system — will be maintained, ensuring that removals do not dilute overall decarbonization ambitions.
The Authority is also considering the creation of differentiated removal units, distinct from current UK emissions allowances (UKAs), though final decisions will follow further technical assessments.
Read more: UK To Integrate Carbon Removals Into ETS
