The UK's Approach To Oil & Gas Is Deeply Worrying
The inane saga continues.
Right now, I am embarrassed to call myself British. Quite frankly, I haven’t felt any national pride since 2012. But salt has been poured into this wound over the past few months. Despite outcries from the public, economists, climate groups and even those within the Tories, the government has backpedalled on many of its climate initiatives. Yet, it turns out this is only going to get worse. New plans around oil and gas licences could make Britain a haven for this destructive industry and make transitioning to a genuine net-zero future even harder.
A few weeks ago, in a climate policy U-turn, the UK’s Prime Minister Rishi Sunak gave out 100 new gas and oil licences in the North Sea. The idea was that these licences would help boost the economy by giving Brits access to cheaper, more secure energy and by creating jobs. However, as many have pointed out (including myself, read my article on it here), this move makes zero sense. For one, according to the IEA, for us to meet our climate goals, we needed to stop tapping into unabated fossil fuels back in 2021!
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So, these new licences directly threaten our net-zero transition and the planet. What’s more, countless studies have indicated that renewables produce cheaper energy, are better for the economy, are more profitable, produce more better-paying jobs, are safer and offer increased energy security over gas and oil. Renewables are better on every metric, from how they will affect the economy, job market, UK stock market and the environment. So Sunak would only support these licences to prop up the fossil fuel industry, in which his near-billionaire family is heavily invested.
As you can imagine, this drew a lot of flack, and the government is looking to save face.
They recently announced plans to switch these licences to a yearly rolling contract rather than a fixed-period one. These plans also mean licences will only be given or renewed if the companies can meet net-zero targets and the oil and gas they produce has a lower carbon footprint than imported oil and gas (due to less shipping, etc).
If that sounds moronic. It’s because it is. Running gas and oil this way has some severe blindsides, namely the impracticality of running oil and gas net-zero, greenwashing, slowing progress, lousy economics and internal government tensions.
Let’s start with running oil and gas companies to net-zero targets. I have covered this extensively in the past (read here), but the fact is that it is practically, economically and financially impossible to offset the emissions from oil and gas. The technology we have that can verifiably remove carbon from the atmosphere is difficult to scale and expensive and will likely remain that way for years to come. It’s also the only way for oil and gas companies to reduce their emissions, as their industry is inherently tied to emissions. As such, it would take billions of dollars and many years to build carbon capture facilities to offset the emissions of just the oil and gas extracted from the North Sea. This immense cost would either be shouldered by the company, significantly reducing its profits and more than likely making them run into the red, the customer, greatly increasing the cost of energy and fuel, crippling our economy, or the government, which would drive up our already sky-high deficit.
This brings me to the second point: Greenwashing. These oil and gas companies aren’t likely to use verified carbon offsets to meet net-zero targets. It would be suicide for them. Instead, they will turn to far less verifiable forms of offsetting, like nature conservation. This approach may sound helpful, but it does very little to positively change the climate. It’s incredibly difficult to calculate how much carbon nature conservation captures, and the industry is rife with over-exaggerated results. So much so that products which use these types of carbon credits to offset their emissions are legally not allowed to advertise themselves as net-zero in the UK, as it is considered greenwashing. As such, these new oil and gas licence plans might inadvertently push an entire UK economy sector to legally embrace greenwashing, which would be a massive step backwards!
It will also slow progress in the renewable industry. There is only so much money that can be invested in our energy infrastructure. So, by enabling oil and gas licences to continue, even though the same energy requirements can be met by renewables, these plans will hinder renewables’ growth. Again, not only are renewables better for the economy, but they are essential to avoid a climate catastrophe, and we are not investing in them enough to do so. IRENA recently found that to hit a climate target of limiting climate change to 1.5 degrees Celsius, global annual energy transition investment needs to quadruple to $5.2 trillion! That might sound like a lot, but it pales compared to the $7 trillion in global subsidies given to the oil industry each year. Basically, if we prioritise investment in renewables over continued expansion of the fossil fuel industry, we could easily solve the climate crisis. The money is already there; we just need to spend it differently.
There is also another side of the economic argument against these new plans. You see, not only do renewables create more, better-paying jobs, but they also keep more money inside the UK economy. For example, one of the major players in the UK North Sea oil and gas industry is Shell. Shell is based in the UK, but it is a giant, sprawling multinational conglomerate. Not only that, it is a company whose distribution of profits is highly concentrated in the top few employees and shareholders, who are again primarily international. On the other hand, renewable energy firms (i.e., those buying and running solar and wind farms) are much smaller, more local, and have a far more spread-out profit distribution. As I said earlier, they are also more profitable. Over the course of five years, investments in UK renewables generated a return of 75.4% compared to only 8.8% for UK fossil fuel investment over the same period. So, renewables keep funds and profits inside the UK economy and can significantly boost our productivity and GDP.
Luckily though, there are those in politics who know these issues. Labour’s shadow energy security secretary, Ed Milliband, has been a staunch opponent of these plans, calling them a “desperate political strategy” that would do “nothing to lower bills or deliver energy security.” He went on to say, “We already have regular North Sea oil and gas licensing in Britain, and it is precisely our dependence on fossil fuels that has led to the worst cost of living crisis in a generation,” and that “expansion of fossil fuel production is not in line with net-zero.” As the vast majority of Brits think the government should be doing more to stop climate change and have been feeling the pinch of years of Tory austerity measures along with a new cost of living crisis, the general public is likely to favour Labour’s more renewables forward position. As such, these plans could struggle to get a foothold, and if they do, they could be scrapped by the next general election, which is brewing on the horizon.
This means that hundreds of millions of investment could be poured into obtaining and using these licences, only for them to be revoked soon after. Not only would this be devastating for the oil and gas industry, but it would be an utter waste of funds that should have gone to renewables in the first place.
These new licence plans show that, yet again, the Tories are willing to cosy up to the fossil fuel industry to hold on to a vestige of influence. Their lack of care for the future of Britain and the world is not only palpable but moronic. If the Tories wish to stay in power, they need to seriously rethink their approach, listen to the science and statistics and put into action sound policies rather than these smoke-screen, backwards and borderline Machiavellian policies that do nothing but attempt to solidify their power. But, with the recent sacking of Suella Braverman and a cabinet reshuffle, this change may be on the horizon. Though, I doubt it.
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Sources: BBC, IEA, CNBC, Will Lockett, NREL, Forbes, Imperial, fDi