Fossil fuel-supported technologies receive a disproportionate share of green funding in the UK
In a data investigation by our website, the focus was on revealing the achievements of the UK's green finance agenda. The investigation revealed an unusual distribution of funds, with approximately £9.8bn allocated to Carbon Capture, Utilisation, and Storage (CCUS) and hydrogen between 2025 and 2030, more than twice the amount allocated for cleantech startups and nature projects.
This uneven distribution primarily reflects the government's priorities around large-scale, infrastructure-heavy technologies perceived as crucial for meeting net zero targets and enabling energy transition at scale. CCUS and hydrogen are seen as enabling technologies for decarbonising hard-to-abate sectors such as industry and heating, thus commanding larger investment.
Key factors explaining this disparity include the strategic focus on transformational, scalable technologies, place-based investment and regional economic growth, different risk profiles and maturity levels, and economic return and appraisal framework.
The government’s recent reforms in the Treasury’s Green Book guidance emphasize transformational change with potential for broad economic and regional impact, favoring large infrastructure investments like CCUS and hydrogen projects. CCUS clusters and hydrogen hubs fit this model, promising industrial decarbonisation and jobs in particular areas, aligning with the government’s “levelling up” agenda.
Cleantech startups are typically earlier stage with higher risk and require smaller-scale, innovation-driven funding. The £4 billion allocation reflects support for innovation but is smaller because these early-stage ventures demand different funding mechanisms and are lower cost by nature.
Nature projects have significant but relatively smaller and more distributed costs. Funding nature-based solutions covers ecosystem restoration, biodiversity, and natural carbon sinks. These projects are crucial but involve more diffuse geographic impacts and lower capital intensity compared to technology infrastructure.
Until recent reforms, public spending appraisal favoured projects with high and measurable direct economic returns (such as infrastructure projects) over less tangible benefits from nature-based solutions or startup innovation. Although the Treasury plans to shift away from narrow cost-benefit thresholds, legacy prioritizations remain evident in spending allocations.
However, the investigation did not discuss the concerns about transparency and effective use of public funds raised by investors. Investors believe that other emerging solutions could offer better value for money in the long run. Cleantech VCs have expressed concerns that the UK government may be funding white elephant projects like CCUS and hydrogen at the expense of other decarbonisation solutions.
The allocation for cleantech startups in the same period is around £4bn, while the government's reporting practices are opaque, leaving investors grappling with vague data regarding other early-stage clean technologies. Clear policy signals have been sent for CCUS and hydrogen, but not for other emerging solutions. The allocation for nature projects is £5.1bn.
The research does not provide specific details about the other emerging decarbonisation solutions that cleantech VCs believe could offer better value for money in the long run. The allocation for CCUS and hydrogen is also more than the allocation for nature projects, raising questions about transparency and the effective use of public funds.
Moreover, the oil and gas industry is a strong supporter of CCUS and hydrogen technologies, while cleantech startups tend to promote decarbonisation pathways that do not require fossil fuels, challenging the interests of the oil and gas industry. This raises concerns about potential undue influence of fossil fuel interests on the UK's net zero agenda.
Science has shown that investing in carbon capture, utilization, and storage (CCUS) and hydrogen technologies aligns with the government's priorities for large-scale, infrastructure-heavy projects aimed at meeting net zero targets. On the other hand, environmental-science-based cleantech startups have expressed concerns that their innovative solutions could offer better value for money in the long run, but receive less funding due to their higher risks and different funding requirements. The reporting practices of the government regarding these early-stage clean technologies are opaque, leaving investors uncertain about the allocation of funds for various decarbonisation solutions.
