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Britain’s North Sea decision: waning leadership at home and abroad

The UK’s recent decision to expand oil and gas leases in the North Sea is not the way to help reduce energy bills or increase energy independence. In a perspective originally published by Politico, Felipe Sanchez, SEI Policy Fellow and a former UK senior policy adviser for environmental issues, argues that the UK’s historic leadership in technology and innovation gives it both the responsibility and capacity to be a transition leader.

Felipe Sanchez / Published on 15 August 2023
North Sea oil rig

Offshore drilling rig in Scotland.

At the end of July — the hottest month ever recorded — British Prime Minister Rishi Sunak announced new oil and gas licenses will be granted in the North Sea.

The United Kingdom government argued that more domestic oil and gas production is the key to reducing energy bills, carbon emissions and dependence on dictators. However, the argument doesn’t hold water.

Framing the decision in this way masks the fact that over 80 percent of the crude oil produced in the U.K. is exported for reasons regarding market dynamics and process optimization. On the other hand, most of the natural gas produced in Britain is consumed domestically — primarily for heating. Therefore, the underlying issue at the heart of energy bills, emissions and security is almost exclusively linked to the U.K.’s dependency on natural gas.

U.K. Energy Secretary Grant Shapps claims that granting new licenses next to existing fields will shorten the lead times associated with exploration and extraction to under a decade. But that means that these licenses will have no impact on energy bills today and — given the costs of extracting dwindling North Sea gas resources — no significant impact on bills years from now, when the gas is finally used, either.

Thus, instead of doubling down on extraction, our research at the Stockholm Environment Institute suggests producers in mature production regions — such as the North Sea — should be preparing transition strategies to ensure no one is left behind. And the fastest way the government can help cut bills, avoid emissions and reduce dependence is by increasing support for energy efficiency measures to reduce the total amount of natural gas needed.

This doesn’t mean enduring cold homes. It means significant public investment to roll out insulation for some of Europe’s least energy efficient housing stock, and simplified schemes for replacing inefficient gas boilers. The government is already taking action on both of these fronts, but the current insulation scheme is estimated to take 300 years to upgrade British homes, and the boiler replacement scheme has already been deemed inadequate by the Lords Environment and Climate Change Committee.

So, rather than using green issues as a political wedge in the wake of the Uxbridge by-election — as such efforts have been widely interpreted — they should be focused on fixing the schemes already in place. Add to the mix a turbocharge for clean energy, grid improvements and transition technologies that produces a step-change in capacity, and one has a well-rounded strategy with both short- and long-term measures for addressing the U.K.’s dependency on natural gas.

Moreover, besides failing to address the root of the problem at home, the decision to grant more licenses also tarnishes the U.K.’s climate leadership abroad — the type of leadership that was shown by being the first country to establish a legally binding framework for cutting carbon emissions, enshrining into law a world-leading net-zero commitment by 2050 and leading global climate efforts as the COP26 United Nations Climate Change Conference president in 2021.

Unfortunately, these green credentials were already being eroded by the ministerial courting of oil executives at COP26; the extension of the license for the controversial Cambo oil field, which sits in marine-protected deep waters; and the missed opportunity to implement truly climate-sensitive checkpoints on future licensing.

Instead of all this, the U.K. government should be paying attention to the lessons learned from its North Sea neighbor, Denmark — specifically, the benefits of the country’s coherent and unwavering commitment to the clean energy transition and fossil fuel phaseout, even when under geopolitical pressure. Denmark has also shown great dedication to a just transition through its support for oil and gas communities at home, as well as its leadership in climate diplomacy abroad.

Even more so than Denmark, however, the U.K.’s historic leadership in technology and innovation gives it both a unique responsibility and capacity to transition. Britain led the way during the industrial revolution, cementing its place on the world stage, spurring trade and national wealth creation, while simultaneously setting the planet off on a course toward global warming.

The U.K. mustn’t shy away from taking a leading role in the global clean energy revolution, and reaping the economic opportunities that come with it.

This perspective, originally published by Politico,  links to the Oil and Gas Transitions programme, which aims to accelerate just transitions amongst producers in the North Sea. The programme is part of the wider Oil and Gas Transitions research project, co-led by Climate Strategies and the Stockholm Environment Institute (SEI). The research project seeks to improve understanding of how countries that produce oil and gas can move away from fossil fuel production towards pathways compatible with global climate goals and a just transition.

Visit the Oil and Gas Transitions project website for more information and reports.

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