UK Government’s bullish support for new oil and gas unwise, CCC warns
The UK Government's climate advisors have stated that its proposed climate "stress tests" for new oil and gas licensing do not go far enough, and urged Ministers against believing arguments that more domestic fossil fuel extraction could help abate the energy price crisis.
In a letter sent to Business and Energy Secretary Kwasi Kwarteng today (24 February), the Climate Change Committee (CCC) welcomes the Government’s proposal to apply climate “stress tests” to future oil and gas projects in the North Sea, originally announced in December 2021 – but states that current proposals do not go far enough for alignment with the 2050 net-zero goal.
“We are concerned that the test, as currently defined, is too narrow and does not provide appropriate grounds to fully assess the climate impacts of new UK developments,” the letter states.
Specifically, the CCC is concerned that the tests only apply to the exploration process, but that they should be expanded to also cover production. The letter outlines how projects consented now will likely not reach peak production for years or even decades, by which point oil and gas consumption should be lower domestically and globally.
The CCC is also recommending that the tests are applied to fields that have received licencing but have not yet been consented for development, including the hotly-contested Cambo project.
The CCC has stated that it is not, at this point in time, able to categorically say that any and all new oil and gas licencing would be incompatible with the UK’s net-zero ambitions and the global efforts to cap warming to 1.5C. Instead, the CCC is recommending “a tighter limit on production, with stringent tests and a presumption against exploration”.
An all-out end to new exploration is a call to action that green groups have made, drawing on the International Energy Agency’s (IEA) landmark report on the net-zero transition last year. The IEA stated in that report that “there is no need for investment in new fossil fuel supply” and uses a scenario in which no new oil and gas fields are approved for development “beyond projects already committed as of 2021”. More recently, a UCL study concluded that any new oil and gas fields would be incompatible with the UK’s Paris Agreement commitment.
In a press call hosted on Wednesday (23 February), the CCC’s chairman Lord Deben was asked why the Committee was not able to come firmly down on this side of the fence. He said the Committee does not, at this point in time, have the “absolute scientific basis” to do so. He explained:: “The arguments on both sides are not clear-cut. It has been the success of the CCC that we have always based our recommendations, our advice, on clear and scientific bases. We don’t have that here…. So we cannot make a recommendation even on climate alone.
“The nearest we can get to that is that we favour a stricter control on these things and an objective view that we don’t do new exploration.”
The letter also outlines how the Government has not yet come up with adequate plans to support local economies and workers as oil and gas production decreases.
The sending of the letter comes at a point in time in which the Government is vocally supporting new fossil fuel exploration. Speaking at the International Energy Week online conference on Tuesday (22 February), Energy and Climate Minister Greg Hands said this Government sees a “good, solid” future for North Sea oil and gas, with “continued investment”.
These comments follow on from a statement delivered in Parliament by Boris Johnson earlier this month, in which he argued that the UK should not yet have reached peak gas production. Elsewhere, there are reports that the Treasury is pressuring BEIS to approve six new North Sea projects as soon as possible, which a BEIS spokesperson told edie that the Department denies.
Energy price crisis context
The debate around whether the UK should allow additional oil and gas extraction was heated up by the IEA’s report last spring and, subsequently, by green groups who argued that the message sent on an international stage by the COP26 host was the wrong one. The summit notably saw the UK refusing to join a new coalition of Governments committing to an end date for new oil and gas exploration, the Beyond Oil and Gas Alliance.
With the dust now fully settled on COP26, the ongoing energy price crisis has served as a lever for many decrying the Government’s net-zero ambition to use the other side of the argument. Recent weeks have seen an uptick in pro-fracking and pro-new-fields sentiment in the media and in some factions of Government, despite the best efforts of BEIS and of industry experts to emphasise the fact that gas is an internationally traded commodity – even if the UK increased production, it couldn’t ring-fence its gas for itself and decrease or stop exporting.
The CCC’s letter reiterates the statements made by groups including the Energy and Climate Change Intelligence Unit (ECIU) in recent weeks. It states: “Any increases in UK extraction of oil and gas would have, at most, a marginal effect on the prices faced by UK consumers in the future.
“The best way of reducing the UK’s future exposure to these volatile prices is to cut fossil fuel consumption – improving energy efficiency, shifting to a renewables-based power system and electrifying end uses in transport, industry and heating.”
It notes, however, that simply limiting the demand for fossil fuels will likely not be enough to encourage producers to accelerate plans for decreasing production.
“With no policy on the supply side, there is a risk that extraction would exceed the amount of fossil fuels that could be burned under climate commitments – leading either to stranded assets of a breach of climate goals.”
This warning has already been made once to the UK Government this week, through a report from think-tank Green Alliance. A similar report this week from Global Energy Monitor outlined how China, India, Australia, the US and Brazil collectively face $192.2bn of stranded asset risk due from gas projects currently in the construction and pre-construction phases.
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