Edward Morello

“There is a lot of truth in what the hon. Member has outlined. We see the most rapid transformation and progress where innovation and expertise are clustered. British innovators are already developing world-leading GGR technologies. The problem is that many of them struggle to raise the long-term investment needed to move from successful demonstrations to commercial deployment. British companies have told me that they will be European or American by the end of next year if the UK does not do more to support them. The Whitehead review made that point very clearly. It recognised that the United Kingdom possesses many of the ingredients required to become a global leader, but that early-stage GGR companies continue to face significant barriers to scaling up. Many of those businesses require substantial upfront capital before they generate meaningful revenue. Private investors understandably look for long-term certainty and a return on their investment. Without that certainty, investment simply flows elsewhere. UK start-ups struggle to access patient capital at precisely the moment they need it most. Of all climate tech early start-ups that failed, 62% fail at series A, the start of the so-called valley of death. Britain has repeatedly invented world-leading technologies only to watch other countries commercialise them. We cannot allow that to happen again. If we get this right, GGRs could become one of Britain’s great industrial success stories. If we get it wrong, we will again become purchasers of technologies developed elsewhere. The Government can create the long-term policy framework that gives markets confidence. The publication of the GGR business model alongside the Whitehead review was an important milestone. The commitment to integrating GGR into the UK emissions trading scheme is another positive step, but companies developing GGRs are making decisions today about where to build their first commercial facilities. Those decisions will determine where future supply chains develop, where highly skilled jobs are created and where intellectual property remains. What the sector is calling out for are low or no cost policy changes that would make a real difference until the response to the Whitehead review finally stops gathering dust on the Minister’s desk. Solutions could be amending the sustainable aviation fuel mandate, improving access to finance from public finance bodies, voluntary carbon market changes, expanding UK GGR standards to wider methods or endorsing interim standards, a new UK buyers’ club, a regulations audit, departmental sandboxes and standards for the emissions performance standard. We must give the market the certainty it is asking for and the investors the confidence to unlock that potential. That brings me to what I believe is the single most important proposal that the Government should consider. The answer lies in creating a British carbon bank, a Government-seeded revolving fund that will crowd in private finance. A British carbon bank would provide long-term advanced market commitments for verified GGRs. That would de-risk the purchase for the offtaker as the credits are certified, provide the capital that the GGR project needs to start capturing greenhouse gases and generating carbon credit, and improve investor confidence because there is a guaranteed purchaser. Rather than the Government attempting to fund every project themselves, a British carbon bank would create guaranteed demand for high-quality removals over many years, allowing businesses to secure investment and scale their technologies with confidence. The Whitehead review recognises exactly this challenge. It concluded that demand certainty will be fundamental if GGRs are to develop at the pace required. Without reliable long-term demand, many technologies will simply struggle to reach commercial scale. One particularly interesting example is Terraset, a US charity. Rather than relying solely on traditional grant funding, Terraset uses philanthropic finance to early pre-purchase commitments to vetted projects, giving those projects the capital to actually remove greenhouse gases. Those advanced commitments provide early demand, giving companies confidence to develop technologies while demonstrating to investors that a future market exists. These projects deliver verified carbon credits to Terraset, which it then sells to buyers. Any revenue generated is then returned to the fund and gets deployed into new projects. For every $1 it deploys, it unlocks $5 in private finance and achieves a 15% mark-up for credits under this de-risk model. As a result of this profit margin, it is now attracting interest from institutional investors, including pension funds. A British carbon bank would take that principle and apply it at a national scale. It would provide a clear signal that Britain intends to become the best place in the world to develop, deploy and commercialise greenhouse gas removal. One strength of a British carbon bank model is that it addresses the greatest barrier currently facing the sector: risk. The bank would purchase future carbon removals in advance, holding those credits until they have been independently verified and certified. There is, of course, a risk for the Government that some projects may ultimately fail to deliver the promised removals or not achieve certification. However, that risk can be significantly reduced through robust due diligence and careful product selection, as organisations such as Terraset have already demonstrated successfully. Importantly, the model also overcomes the current “chicken and egg” problem in the market. Today, many buyers are reluctant to pre-purchase carbon removals because they bear all the delivery risk. By contrast, a British carbon bank would offer only certified verified credits to the market, making them far more attractive to businesses seeking high-integrity carbon removals while simultaneously providing developers with the up-front certainty they need to secure investment and scale their technologies. The market will determine which solutions ultimately prove effective, whether nature-based approaches, direct air capture or entirely new technologies that are yet to emerge. With a relatively small Government investment, we could seed this market, crowding in five or 10 times more in private finance. Terraset supported Graphyte, which needed early-stage capital to move from planning into commercial deployment. Private buyers recognised the value of the project, but were not yet ready to commit at the scale or speed required. Through its revolving fund, Terraset made an advance commitment of just over $100,000, providing the confidence and working capital that enabled the project to proceed. Once Graphyte had delivered independently verified carbon removals, those credits were purchased by a commercial buyer, with the proceeds going back into the revolving fund to support the next generation of projects. I believe that a British carbon bank could replicate this revolving model at scale, helping promising British companies bridge the gap between innovation and commercial success. Net zero is today’s problem, and net negative is tomorrow’s, but if we do not start thinking about it now, we will not be ready to meet that challenge. We should be ambitious. We should not settle for participating in the market—we should aim to lead it. Will the Minister confirm precisely when the Government intend to publish their full response to the Whitehead review, and whether that will be before the House rises for the summer recess? Will he confirm whether the Government are giving serious consideration to the proposal for a British carbon bank or revolving fund to provide the long-term market certainty the sector has consistently called for? If the Government are not yet in a position to introduce longer-term reforms, what interim measures will they take to ensure that promising new UK GGR businesses are supported and not lost overseas while policies are being developed? Finally, will the Minister commit to continuing to work closely with the sector over the coming months, listening to businesses, investors and researchers, so that the UK can seize the opportunity to become a global leader in greenhouse gas removals rather than watching others move ahead? Carbon does not recognise borders or respect international treaties; it is a global challenge that demands world-leading solutions. I believe that those solutions should be developed here in the UK.”