UK launches carbon management innovation challenge to cut carbon capture costs
The UK Government has launched a new Carbon Management Innovation Challenge aimed at accelerating the development of carbon capture and greenhouse gas removal technologies, with ambitions to halve the cost of key solutions by 2040 and strengthen the country’s clean energy economy.
The challenge, announced by the Department for Energy Security and Net Zero (DESNZ) on 15 July 2026, is the first initiative under the UK Cleantech Innovation Challenges programme, which has been established to support mission-critical innovation needed to deliver future carbon budgets and the UK’s net zero target.
Carbon capture, utilisation and storage (CCUS) and greenhouse gas removals (GGRs) are expected to play a crucial role in reducing emissions from hard-to-abate industries, decarbonising power generation, supporting low-carbon fuels and balancing remaining emissions through permanent carbon removal.
The UK Carbon Management Innovation Challenge will focus on accelerating the development, demonstration and commercialisation of innovative solutions across the carbon management sector. The programme aims to create a stronger ecosystem for businesses, researchers and investors while helping reduce the costs associated with emerging technologies.
Under the challenge, the Government has set three key ambitions for 2040. These include innovation that could halve the cost of point-source carbon capture across major UK applications compared with 2025 benchmark costs, halve the cost of direct air capture technologies, and support the creation of at least 10 commercial-scale engineered greenhouse gas removal projects that do not rely on carbon capture and storage infrastructure.
DESNZ said innovation will be critical to making carbon management technologies more affordable and scalable. Research from the Energy Innovation Needs Assessment suggests that high levels of innovation in direct air carbon capture and storage could save between £31 billion and £62 billion cumulatively between 2025 and 2050 compared with a low innovation pathway. Similarly, innovation in bioenergy with carbon capture and storage could deliver potential savings of between £55 billion and £76 billion over the same period.
The carbon management sector is also expected to deliver significant economic opportunities. CCUS and CCS-engineered GGR technologies could support around 50,000 jobs in the UK by 2050, while helping develop domestic supply chains and attract private investment.
Despite growing progress in pilot and demonstration projects, the Government highlighted several challenges that must be addressed before widespread commercial deployment can take place. These include reducing high capital and energy costs, improving technology performance, expanding transport and storage infrastructure, and increasing investor confidence.
The challenge will support innovation across the entire carbon management value chain, including improved carbon capture processes, modular technologies, manufacturing capability, geological storage solutions and monitoring, reporting and verification systems.
A key part of delivery will be the creation of a Carbon Management Innovation Challenge Coalition, bringing together technology developers, industry partners, investors, academics, public sector organisations and other stakeholders. The coalition will help shape the programme, monitor progress and encourage collaboration across the sector.
DESNZ will also establish a group of Innovation Champions, providing selected technology developers with tailored non-financial support for up to two years. The support package will include opportunities to connect with investors, customers and international partners, as well as access to knowledge-sharing activities and policy engagement.
Applications to join the Challenge Coalition are expected to open in 2026, with the first meeting planned for autumn 2026. A competitive process to select Innovation Champions will also launch later in the year.
The Government will work with organisations including UK Research and Innovation (UKRI), public finance institutions and industry partners to explore funding opportunities, improve market conditions and address regulatory barriers that could slow deployment.
The challenge will also examine opportunities to strengthen markets for carbon removals, improve standards and support international collaboration through initiatives such as Mission Innovation and the International Energy Agency’s greenhouse gas emissions programmes.
DESNZ plans to publish a progress report on the UK Carbon Management Innovation Challenge by summer 2028, assessing achievements and outlining future steps for the sector.
The launch represents a major step in the UK’s efforts to build a globally competitive carbon management industry, supporting the transition to net zero while creating new opportunities for innovation, investment and skilled employment.
