Reports of changes to the way carbon storage accounting is measured, adds to the uncertainty over Drax Group's (LSE:DRX) BECCS technology and subsidies going forward, suggests Citi.
Citing minutes from the Intergovernmental Panel on Climate Change, the US bank says that changes to the clarity of BECCs and biomass bridging mechanism, which on the back of possible rule changes “could be kicked into the long grass”.
“Drax's current subsidy ends 31/3/27, with its cashflow NPV diminishing each day.”
A classification of negative emissions could hand the carbon saving to the biomass exporting country, which in Drax's case, would be the US/Canada, says Citi, adding it is not clear if the IPCC will change its carbon accounting rules.
“However, it would be odd for the UK government to make a decision on the future of BECCs subsidies in the absence of knowing if BECCs qualify as negative emissions for the UK.”
Sahres down 0.5% at 665p.