Source · Select Committees · Environmental Audit Committee
Recommendation 5
5
Rejected
Paragraph: 55
No consensus on fossil fuel transition speed risks climate goals and stranded assets.
Conclusion
We have previously concluded in our report ‘Accelerating the transition from fossil fuels and securing energy supplies’ that there is not a consensus on the speed of transition from fossil fuels as the Government endeavours to reach net zero by 2050. While the scientific consensus is clear that planned production of fossil fuels is already enough to exceed safe climate limits, with the IPCC’s recent Synthesis Report warning that “projected CO2 emissions from existing fossil fuel infrastructure without additional abatement would exceed the remaining carbon budget for 1.5°C”, there is a view from some financial institutions, recently endorsed by the UK Government, that new licences have a role to play in reducing reliance on imported fossil fuels. Energy security is sometimes used as justification to pursue new oil and gas exploration, but we have found that this approach may not The financial sector and the UK’s net ero transition 59 reflect climate goals effectively, as there is a risk that it may lead to either missing climate targets or ending up with stranded assets. Therefore when planning for net zero energy security and a just transition for the workforce, it is crucial that the Government considers the balance between the North Sea as a declining asset, and the UK’s capacity for renewable energy as the UK moves towards a net zero future.
Government Response Summary
The government rejects the committee's concern regarding the balance of North Sea assets and renewables, asserting that the domestic oil and gas industry remains vital for energy security. It states that new licensing, supported by existing and new legislation, ensures a managed decline of oil and gas production compatible with net zero targets.
Paragraph Reference:
55
Government Response
Rejected
HM Government
Rejected
The domestic oil and gas industry is vital to the UK’s energy security. While the Government is scaling up domestic clean energy sources, the UK still relies on oil and gas for most of our energy needs and there will be continued need over the coming decades. Data published by the Climate Change Committee suggests a significant proportion of our energy will come from oil and gas even when we reach net zero in 2050. To meet this supply domestic production is better in terms of jobs, tax receipts and environmental emissions than imported alternatives. Beyond energy, oil and gas will remain essential to modern life for many years to come, including in the production of plastics, chemicals, and fertiliser. As the International Energy Agency has recognised, the skills and resources of the oil and gas industry will be crucial for the transition to net zero. New licensing will help bolster our energy security, decarbonise production, and bring jobs, investment, and revenue to the UK. The sector’s investments, supply chains and skilled workforce are exactly what we need to lead the world in delivering the energy transition. Even with new licences, UK oil and gas production is declining at 7% a year. That is faster than UK consumption will decline as we meet net zero, and faster than the average rate of decline needed globally to align with 1.5-degree pathways, according to the UN environment programme. The Government has taken action to avoid a poorly managed decline by agreeing the North Sea Transition Deal, a global exemplar of how a government can work in partnership with industry to achieve a transition which leaves no-one behind. The Government has also introduced the Offshore Petroleum Licensing Bill, providing industry with long-term certainty about the offshore licensing process. This Bill will make the UK more energy independent by increasing investor and industry confidence with regular annual oil and gas licensing. The Bill’s emissions and net importer tests will ensure that future licensing supports the transition to net zero. New licensing simply slows the fall in UK supply, rather than increasing supply above current levels. This ensures a managed decline at a pace that supports the UK’s energy security and the offshore workforce’s transition away from fossil fuels. The expected emissions from potential future projects are factored into the UK’s carbon budgets and will not compromise them being met.