With thousands of UK-based oil and gas workers on furlough and the sector’s economic recovery likely to be slow, policymakers are facing calls to cap North Sea fossil fuel production and reskill communities for low-carbon industries.
Think tank IPPR has today (3 December) published a new report detailing how UK business’s operations in the North Sea will need to change if the UK is to meet its 2050 net-zero target.
The report states that some 260,000 jobs are linked to the oil and gas industries across the UK, with a high concentration in Scotland and the North of England in the offshore sector. Aberdeen is the area most directly dependent on the sector – more than 10% of jobs in the city and 5% in surrounding Aberdeenshire are related.
The IPPR outlines how the sector has been one of the worst-affected by Covid-19, with demand for oil slumping in the UK and globally due to lockdown restrictions.
In order to protect communities which rely on the industry – both from Covid-19 in the short-term and the net-zero transition – the IPPR recommends that the UK and Scottish governments collaborate to develop a ‘net-zero deal’. The deal should include time-bound, numerical targets for capping the production of fuels for use domestically and abroad. Changes to the “maximum economic recovery” law for oil and gas firms, to implement legally-binding caps, would add teeth to this target.
Of course, the IPPR is not advocating for the sector to be downsized at the expense of workers. It is recommending that reskilling academies are set up in Scotland and the North of England, at a total cost of £103m per year, to ready oil and gas workers for roles in industries like decommissioning, offshore wind, energy efficiency retrofitting, sustainable transport, hydrogen fuel and carbon capture and storage (CCS).
At the same time, it wants the Government to increase investment in these sectors dramatically, and to work with local authorities to support the delivery of major infrastructure. To the former point, the IPPR sees Aberdeenshire needing extra support to mobilise capital for low-carbon projects. On the investment piece, the IPPR has repeatedly claimed that the UK government will need to invest an additional £30bn per year to meet its environmental ambitions.
Aside from the job creation and retention benefit of its plan – and its contribution to decarbonization – the IPPR believes that the creation of a North Sea ‘net-zero deal’ would send a strong message at COP26.
“As host of COP26, the UK has the opportunity to lead by the ‘power of our example’ by committing to keep fossil fuels in the ground and offering a blueprint for affected workers and communities to make the most of the huge opportunities offered by the zero-carbon economy,” the IPPR’s associate director Luke Murphy said.
The new recommendations build on the think-tank’s broader green recovery framework, which it claims could create 1.6 million jobs across the UK including 134,000 in Scotland. The framework emphasises the potential of the retrofit, public transport and nature sectors.
A slow transition
The publication from the IPPR comes shortly after OGTC and Offshore Renewable Energy Catapult released a new analysis of the North Sea sector’s economic viability and position in the net-zero transition.
That analysis revealed that investment into technologies such as floating offshore wind and clean hydrogen could capture up to £125bn in annual benefits – but that the total number of jobs on offer could fall by at least 20% without incentivising policies.
There is disagreement about the role that oil and gas could – and should – play in the economy of the future, given its role as an employer and its ability to invest in alternative technologies and skills. However, many companies and nations have acknowledged that Covid-19 has changed the trajectory of the sector, including BP.
New research out this week has highlighted how the transition away from coal, globally, has been far more rapid than away from oil and gas, in terms of investment from governments and the private sector.
The Insure Our Future campaign’s fourth annual scorecard reveals that more than 65 insurers with combined investments worth $12 trillion have either adopted a divestment policy or committed to making no new coal investments.
This means that almost half of the global reinsurance sector will not deal with coal. The proportion stands around 13% in the primary insurance sector.
However, none of the insurers analysed had such blanket policies on oil and/or gas.