Only around £12 million of the £200 million grant promised to Scotland’s Acorn carbon capture project is expected to be handed over as grant funding, deepening the row over the future of the scheme.
The remaining support is set to come through loans or government equity investment instead, after Chancellor John Healey’s Budget changed the way the project will be financed.
The £12m figure, equivalent to around six per cent of the original commitment, reported by The Scotsman and the Press and Journal, comes just days after a Treasury minister insisted the £200m grant remained intact.
Chief Secretary to the Treasury Emma Reynolds told BBC Radio Scotland on Thursday that there had been no cut to the £200m and described it as grant funding.
She said: “We allocated that money and we stand by that commitment.”
But the UK Government has since confirmed that further financial support for Acorn will move from capital grants to financial transactions, including loans or equity investment.
A written parliamentary answer from the Department for Energy Security and Net Zero on Friday said development grants had been allocated to Acorn in line with the project’s needs.
It added that, following the Budget, further support would move to government loans or equity investment which would be expected to produce a return for taxpayers.
The Budget document itself says the government will save £200m in capital grants from carbon capture projects as the Department for Energy Security and Net Zero redirects spending towards the Defence Investment Plan.
It says ministers are now looking at how loans or equity investment could support projects still in development, including Acorn.
Scottish Secretary Douglas Alexander has insisted the UK Government remains committed to the project.
He told the Press and Journal the £200m would still be provided, but through the financing mechanism set out in the Budget.
The latest position represents a shift from the commitment made at the 2025 Spending Review.
At the time, the UK Government said it was meeting in full a request for around £200m of development funding to prepare Acorn for delivery.
The Acorn project itself said last year that it and its Scottish Cluster partners would receive around £200m in development funding.
The scheme is centred on the St Fergus gas terminal near Peterhead and would capture carbon dioxide from industrial sites before transporting it for permanent storage beneath the North Sea.
It is also intended to use existing oil and gas infrastructure, including a pipeline connecting central Scotland with the north-east.
The project has been presented as a key part of Scotland’s transition away from oil and gas and is expected to support thousands of jobs.
The funding dispute has become increasingly confused since Wednesday’s Budget.
The Budget said grant funding would be maintained for the Viking carbon capture cluster in the Humber while projects including Acorn would be considered for private investment, loans or equity.
Ministers initially gave differing accounts of whether the existing £200m Acorn commitment had been affected.
Reynolds then said on Thursday that the grant had not been cut, before the Department for Energy Security and Net Zero clarified that future support would no longer be provided as capital grants.
The government has yet to take a final investment decision on the full Acorn project.