Could carbon caverns under the sea fire up your funds?

What if it were possible to lower our greenhouse gas levels by sucking carbon from industrial emissions and storing it in huge caverns under the sea?

In one fell swoop we can reduce the amount of CO2 pumped into the atmosphere when we burn the fossil fuels responsible for climate change.

Well, last month the government announced it would put just that £20bn in funding. The new (and expensive) technology is called carbon capture and storage and ministers hope it will help Britain reduce its carbon emissions to ‘net zero’ by 2050.

So is this an exciting new development in the fight to clean our energy supplies and protect the planet? And if so, how can you benefit from it as an investor?

What exactly is carbon capture?

Carbon dioxide is a greenhouse gas that is emitted into the atmosphere when fossil fuels are burned to produce energy.

Carbon capture works by separating CO2 from other gases produced by power plants. It is then pumped deep into submarine caves that were once filled with oil, gas or water. The idea is that the CO2 should stay there for hundreds of years.

Last week, Grant Shapps, energy security minister, claimed Britain could store most of the carbon dioxide produced in Europe under the North Sea for the next 250 years.

The UK is spending £20bn to set up four ‘industrial clusters’ over the next two decades. The government wants to store up to 30 million tons of CO2 by 2030.

According to the Center for Climate and Energy Solutions, carbon capture could deliver 14 percent of the global greenhouse gas reductions needed by 2050.

So can I bet big on this?

The technology has not yet won over everyone. Scientists warn that carbon capture has never worked on a large scale before, and some critics would prefer the £20bn spent on renewable energy investment.

Jason Hollands, of investment firm Bestinvest, says the government’s decision is “a big gamble”.

“Carbon capture has been under development for some time, but there have been no successful major projects,” he says. Nevertheless, the government says the project will support up to 50,000 UK jobs.

Okay, what should I invest in?

Companies involved in carbon capture and storage tend to be the largest players in the energy sector. Last week, the government selected eight carbon capture and storage projects in Teesside and North West England and announced plans to begin formal financing talks.

These included oil giant BP, Norwegian group Equinor, private company Viridor and Indian-listed conglomerate Essar Group.

One way to make sure you’re investing in carbon capture technology is to invest in these companies directly or through a fund.

Ben Yearsley, from Shore Financial Planning, says: ‘It’s BP and Shell who will be the winners of carbon capture and storage, counterintuitive as that may seem.’

BP is the largest investment in the Jupiter UK Special Situations Fund, which holds approximately £2.1bn of investor money, representing 6 per cent of its total investments. The fund has a net return of 11.3 percent last year and 76.5 percent over three years, and charges an annual fee of 0.76 percent.

Mr. Hollands says that VH Global Energy Opportunities, a British listed investment company, is another way to get involved. It is listed on the London Stock Exchange and available to invest through brokers such as Hargreaves Lansdown. It comes with a running charge of 1.4 percent.

The investment company has had a rough three years, losing 14.7 percent, but rising 2.3 percent last month.

“It is involved in two carbon capture projects, including one where excess CO2 is sold to the food and beverage industry,” says Hollands.

Other major oil and gas companies, such as Britain’s Drax and SSE, were initially overlooked by the government. However, Drax has since stated that it has been invited to talks about a £2 billion investment scheme, alongside a North Yorkshire biomass power station.

Drax is listed on the FTSE 250. The share price is down 24.5 percent over the past year, from 805.5p to 608.4p today.

The Jupiter UK Alpha fund, which invests £642.4m in savings, is heavily invested in Drax. The energy company makes up 4.74 per cent of the fund’s investments, equating to a stake of £30.5 million. The fund has returned 4.3 percent in the year to April and has gained a whopping 67.6 percent over the past three years.

A number of funds from investment group Invesco also invest in Drax, including the £1.37 billion UK Opportunities fund, of which Drax makes up 2.35 per cent. The fund has returned 6.4 percent in the year to April and 94.6 percent over three years.

Any exciting stocks to note?

If you can bear the risks of investing in a new industry, there are plenty of companies outside of the big names.

Mr Hollands pointed to Aker Carbon Capture, listed on the Oslo stock exchange. The share price is up 19.4 percent over the past year to $1.38. You can buy shares listed on the Oslo Stock Exchange through an online broker.

Beware, though: Investing in high-risk small foreign company ventures should only be a point with a smaller portion of your portfolio.

US oil giant Occidental Petroleum is involved in carbon capture projects through its subsidiary Oxy Low Carbon Ventures. The share price is up 8.5 percent over the past year to $65.35.

Hollands says Warren Buffett’s Berkshire Hathaway is a major investor, with a 23 percent stake. Occidental Petroleum is listed on the New York Stock Exchange (NYSE).

You can invest in stocks listed on the NYSE through most online trading platforms or brokers.

France’s largest energy company, TotalEnergies, has invested about 10 pc in recent years. of its research and development budget devoted to carbon capture and storage. It is included in the EURO STOXX 50 index, accessible through most brokers.

The TotalEnergies share price has risen by 22.3 percent to € 57.30 in the past year.