The UK’s Greenhouse Gas Removal Business Model and What It Means for Engineered Carbon Removal
The UK Government has formally published the Greenhouse Gas Removal (GGR) Business Model, a landmark policy intervention designed to catalyse investment in large-scale engineered removals. This framework represents a decisive moment for the sector, providing not only revenue certainty through a 15-year Contract for Difference (CfD) mechanism but also significant capital support during the construction phase of qualifying projects.
For developers such as Nellie Technologies, which already operates a live CO₂ removal facility in Wales and is scaling towards 100,000 tCO₂ per annum, this policy architecture offers a credible pathway to bankability and long-term market integration.
A Structured Revenue Support Mechanism
At the core of the Business Model is a two-way symmetric CfD. Projects will agree a strike price (set at the levelised cost of CO₂ removal, including eligible capital and operational expenditure plus an allowed return). Developers will then sell their verified GGR credits into approved markets.
If the achieved sales price is below the strike price, the government counterparty will pay the developer the difference.
If the achieved sales price exceeds the strike price, the developer will return the surplus to the government counterparty.
This is designed to share risk, avoid windfall profits, and ensure value for money for the taxpayer. Importantly, the CfD provides 15 years of indexed revenue certainty, allowing project sponsors to raise debt and equity at competitive terms.
Capital Grants: De-risking the Construction Phase
Recognising the scale of upfront capital required, the government is offering a capital grant covering up to 50% of eligible capex. For context, a £20 million capture facility could receive up to £10 million in grant funding at financial close, with the balance supported by private capital and the CfD.
Additionally, the Grant Funding Agreement framework (published in August 2025) sets clear pre-conditions, including:
Parent company guarantees;
Detailed construction schedules with milestone-linked drawdowns;
Comprehensive deliverability and deliverables plans.
This aligns the grant mechanism closely with infrastructure finance norms and ensures robust oversight.
Addressing Cross-Chain Risk
One of the most significant barriers to Carbon Capture, Usage and Storage (CCUS) projects has been cross-chain risk—the risk that capture projects are built on time but cannot operate due to delays in CO₂ transport and storage (T&S) infrastructure.
The GGR Business Model directly addresses this by including two relief mechanisms for T&S commissioning delays:
Time relief – the contract start date can be shifted to account for late T&S commissioning.
Payment relief – developers are not financially penalised during periods when they are unable to store captured CO₂ due to T&S unavailability.
For investors and lenders, this substantially improves the risk-adjusted profile of UK projects, mitigating one of the most frequently cited financing concerns.
No Volume Support – Market Confidence Instead
Earlier consultations had suggested that government might intervene to provide “volume support” if projects were unable to sell their credits. This has been dropped. Instead, the government points to two confidence-building developments:
Rising voluntary carbon market (VCM) demand for high-durability removals. Recent transactions have cleared above £200/tCO₂ for biochar credits and £800/tCO₂ for direct air capture credits.
The planned integration of engineered GGRs into the UK Emissions Trading Scheme (UK ETS) by 2029, creating a compliance-grade market with expected annual demand of 75–81 MtCO₂ by 2050.
This shift signals that government sees sufficient market depth emerging to underwrite projects without needing an additional volume backstop.
Technical Obligations and Compliance
All credits issued under the Business Model must comply with the UK Government’s GGR Standard. This requires:
Full chain MRV (Monitoring, Reporting, Verification) from capture through to permanent storage or sequestration;
Use of an Approved Registry;
Alignment with international best practice and ISO standards where applicable.
Projects must also comply with fair market value provisions—ensuring that off-take agreements with affiliates are benchmarked and independently audited.
For Nellie Technologies, the publication of this Business Model is a pivotal development:
Biochar as a recognised pathway: While the initial allocation rounds (Track-1 HyNet expansion, ECC sequencing) focus on DACCS and BECCS, the GGR Standard explicitly recognises biochar as a durable removal method. This positions Nellie’s PhycoChar® within the scope of future CfD allocation rounds.
Capital leverage: With access to up to 50% capex grants, Nellie’s planned 100,000 tCO₂ facility could see tens of millions in government support, lowering the equity burden and improving internal rates of return.
Bankability: The 15-year CfD offers a revenue floor. Coupled with existing offtake commitments, this provides a credible route to project finance.
Risk allocation: Relief provisions on T&S delays will be critical as Nellie evaluates options for permanent CO₂ storage alongside biochar sequestration.
Market integration: The UK ETS pathway provides a compliance-grade revenue stream post-2029, complementing voluntary offtakes already secured.
The GGR Business Model represents a turning point for engineered removals in the UK. By combining a 15-year CfD, capital grants up to 50% of capex, and a robust compliance standard, government has created the enabling conditions for private capital to flow into large-scale carbon removal.
It provides the financial, legal, and regulatory scaffolding to move from pilot to industrial-scale deployment, unlocking a pathway to remove hundreds of thousands of tonnes of CO₂ annually while generating co-benefits for agriculture, industry, and communities.
