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Peterhead confirmed for carbon capture site...but it's not a bribe, says Ed Davey

Major investment in an innovative energy plant in Scotland is not being unveiled as a bribe to persuade Scots to reject independence, Energy Secretary Ed Davey has insisted.

He confirmed Peterhead as the location for the world's first gas-fired carbon capture and storage (CCS) facility as part of a £100 million Government investment in the new technology.

Harmful carbon dioxide emissions would be buried under the North Sea in the project, which goes alongside previously-announced plans for a coal-fired version in Yorkshire.

But Mr Davey said an independent Scotland would find it "more difficult to proceed" with the project.

Outside of the UK, future variations in oil and gas prices would also leave Scotland's finances "very seriously" exposed as measures were set out to better exploit remaining North Sea reserves, he predicted.

Denying it was a bribe to Scots to vote "no" in September, Mr Davey told the BBC Radio 4 Today programme: "That's not what I am saying.

"I am in charge of UK energy and climate change policy. We are not preparing for independence; we are pursuing our policies as if the UK is going to stay together.

"And with the UK staying together, we need to tackle climate change, we need to invest in low-carbon projects.

"It is just a fact that if Scotland was to vote for independence... it would be more difficult because it would be more expensive."

Speaking ahead of a meeting of the UK Cabinet in Aberdeen as the referendum debate switched focus to energy, Mr Davey said a review into better exploiting North Sea oil and gas reserves "does play into the independence debate".

"Scotland would be very reliant on oil and gas revenue and, with the oil price being so volatile, with decline in North Sea revenues, I think that would expose the finances, the public spending of Scotland very seriously," he said.

"What we are showing today in the Wood Review is that Westminster will manage the oil and gas reserves that the UK has in a far more effective way and that's great for Scotland.

"Scotland has benefited from North Sea oil, let's be clear about this. It is the third booming region in the UK. After London and the South East, Scotland is doing incredibly well, as part of the UK."

WWF Scotland director Lang Banks said: "Demonstrating carbon capture on this existing gas power station would enable us to test the technology and cut emissions from our energy sector whilst we transition to a renewable future.

"Scotland is rich in renewable sources of energy and going forward could have a secure electricity supply without any need for fossil fuel power.

"However, as we transition to a 100% renewable future, Scotland is also well placed to develop and test CCS - a potentially important global technology. It's great to hear that we might be about to start turning this opportunity into a reality."

First Minister Alex Salmond said plans for the CCS facility would also go ahead under independence.

He told the Today programme: "It's something we've been calling for for over a decade but successive Westminster governments haven't gone ahead with it.

"I think it's imperative we do go ahead so I welcome it because carbon capture technology is one of the most exciting things, both for containing CO2 emissions and for enhancing oil and gas recovery from the North Sea, so it's a double win.

"We are seeing a massive investment in the North Sea at the present moment, it could be argued that much of this investment would've gone ahead in 2011/12 if it hadn't been for George Osborne's number of tax changes that caused uncertainty.

"We've had 16 tax changes in the North Sea in 10 years, we've had 14 oil ministers in the last 17 years, three in the last four years, one thing that Scottish control of oil and gas resources will offer is a much more stable, long term policy."

Mr Davey announced in a written statement to the House of Commons that a contract has been signed with Shell for the Peterhead project, which could save one million tonnes of carbon dioxide emissions each year by storing the greenhouse gas 2km under the North Sea in the old Goldeneye gas field.

If built, the project could provide clean electricity to more than 500,000 homes and create "a new future" for spent North Sea oil and gas fields as CO2 stores, said Mr Davey. And taken together with the White Rose project in Yorkshire, he said the Peterhead scheme could support more than 2,000 jobs during construction.

"By bringing forward CCS, we could save more than £30 billion a year by 2050," said Mr Davey.

"Without it, achieving an affordable, low-carbon energy mix with renewable and nuclear energy alone will be much more difficult and more expensive."

The multi-million pound contract for engineering, design and financial work on the world's first planned gas CCS project will involve installing carbon capture technology onto SSE's existing Peterhead gas power plant,and transporting the carbon dioxide 100km offshore for safe, permanent storage.

"We are investing around £100 million from our £1 billion budget to take the Peterhead and White Rose CCS projects to the next stage of development - which together could support over 2,000 jobs during construction and provide clean electricity for over one million homes," said Mr Davey.

"In late 2015, the projects will take final investment decisions, with the Government taking decisions shortly after."

Shell UK chairman Ed Daniels said the agreement was a "hugely important step" towards delivering a project with the potential to make gas - already the cleanest burning fossil fuel - "even cleaner".

"CCS could be critical to reducing carbon emissions at a time of growing global demand for energy," he said.

"The successful demonstration of the technology at Peterhead would be a step towards proving its commercial viability as a tool for mitigating climate change. It could also help diversify the North Sea oil and gas industry - and so contribute to the sector's long-term commercial health."

Ed Daniels, chairman of Shell UK, said the independence debate is a matter for voters.

He said: "It's really clear that the independence debate is a matter for Scottish people."

"People need to make an informed decision and it would be wrong for us to intervene.

"But as a company that is a significant player in the North Sea, and as a company making long-term decisions over 30 or 40 years, it's important for us to understand what that stable investment climate is going to be."

He gave his view before hosting a visit from senior UK ministers at Peterhead power station.

Mr Daniels said the CCS deal is a unique opportunity to help address climate change.

"Today is a really major day for energy for the UK and more broadly," he said.

"This is going to be a fundamental part of addressing climate change."

Deputy Prime Minister Nick Clegg, said: "The innovation of the UK's energy industry is something we should be really proud of and the fact that we are a world leader in carbon capture and storage is a great example of our country's ingenuity.

"Today's multi-million pound deal with Shell will help to safeguard thousands of jobs and power half a million homes with clean electricity.

"It shows we can build a stronger economy and do it fairly by protecting our environment for future generations."

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