[From 19 March 2015]
Plans to boost the North Sea oil industry, announced in the budget, could lead to the UK emitting tens of millions more tonnes of CO2 over the next five years, Guardian analysis reveals.
The chancellor, George Osborne, this week announced a package of measures in the budget designed to help boost North Sea oil production in the face of plummeting global oil prices. The moves include tax cuts on profits for oil producers, a new investment allowance, and funding for seismic surveys to help find oil deposits. In all, the measures will cost the exchequer £1.3bn over the next five years.
The budget document states that the aim is for the measures to lead, in the next five years, to at least 120m barrels “of oil equivalent, of additional production”.
The assumption prompted the Green party to question why the “greenest government ever” was providing additional support for burning fossil fuels.
“This Lib Dem, Conservative coalition government started claiming to be the ‘greenest government ever’, and ended giving huge subsidies to the oil industry,” said Andrew Cooper, the party’s spokesman on energy. “More investment is really needed in energy efficiency and renewable energy, precisely the areas this government has cut … this government are climate-change deniers in all but name.”
Figures published by the US Environmental Protection Agency suggest that on average each barrel of oil burned emits 0.43 tonnes of carbon dioxide, suggesting that if the UK budget measures succeed in producing an extra 120m barrels of oil in the next five years, these will add 50m tonnes of carbon dioxide to the UK’s emissions, if burned domestically.
Ed Davey, the energy secretary, last week pledged his support for the Guardian’s “keep it in the ground” campaign, which urges keeping most of the discovered fossil fuel deposits in the ground to avoid catastrophic climate change. However, Davey defended supporting North Sea oil extraction in the short-term as a solution to the UK’s dependence on Russia and the Middle East for energy resources.
“I have been clear that coal assets are very risky but you are not going to get rid of cars and gas heating systems overnight and so we are going to need quite a lot of oil and gas,” he said. “The question is, would you like that to come from Russia and Qatar or locally where it is well regulated, gives us jobs and provides tax revenues?”
The non-partisan Green Alliance noted it was possible for the UK to produce more oil without increasing global emissions, but said this relied on another country cutting back its own extractions in response to Britain’s increased activity.
Dustin Benton, the Green Alliance’s head of energy and resources, said:
“From a climate perspective, as long as UK oil production displaces production elsewhere, there’s no effect – other oil producers will just lose market share. But if new oil production increases the total amount of oil that gets burnt, then there’s an inconsistency with our climate aims.”
Benton also said there was a risk that subsidy and investment in North Sea oil could be a waste of money, due to the relatively high cost of extracting oil from those fields as opposed to elsewhere in the world. If oil prices stayed low, or if serious policies were enacted to tackle climate change, the investment and infrastructure could easily be wasted.
“From the perspective of financial prudence, the question is whether changing tax treatment to shift infrastructure investment towards high cost oilfields increases the risk that these will become stranded assets – even the Bank of England is concerned at this prospect,” he said.
A spokesperson for the Department of Energy and Climate Change said:
“The UK will continue to need oil and gas as a part of our energy mix even as we cut our carbon emissions over the coming decades. That includes working to maximise home-grown energy sources rather than relying on imports from volatile markets like Russia and the Middle East, which is why the government continues to work hard to support the future of the North Sea industry.”
Source: The Guardian