Proposals would see North Sea developers having to meet six net zero tests including emissions and green investment targets in order to secure extraction licenses

The government is proposing six climate tests that future UK oil and gas extraction projects would have to meet in order to secure the green light in future offshore licensing rounds, as it continued to insist such projects could potentially still go ahead even despite the UK’s net zero commitments.

A six-week consultation launched today seeks views on the design of a new net zero compatibility checkpoint for the oil and gas industry, which sets out six potential climate conditions which future oil and gas extraction projects would have to meet in order to secure government approval.

Many green groups argue that no new oil and gas projects can be compatible with the UK’s climate targets, but Business and Energy Secretary Kwasi Kwarteng said the government was backing the oil and gas sector’s shift to net zero by 2050, but that “this has to be a transition, not extinction”.

“Turning off the taps would put energy security and British jobs at risk – and leave us more reliant on foreign imports,” he said.

The document suggests new oil and gas extraction projects could still be developed in UK waters if they are aligned with goals of the North Sea Transition Deal earlier this year, which commits the sector to halving its emissions by 2030 from 2018 levels, before delivering a 90 per cent reduction by 2040, and net zero thereafter before 2050.

Future bids for licenses should also “be viewed in the context of the government’s wider climate commitments”, including its carbon budget targets to clash 1990 emissions across the economy by 78 per cent by 2035, which could potentially see stricter targets imposed on oil and gas in future as a result, the document suggests.

Moreover, the consultation recommends setting an international benchmark for the emissions associated with oil and gas extraction, in order to assess whether emissions from future domestic projects are lower than the amount that would be produced from importing fossil fuels from abroad. Projects which fail to demonstrate lower emissions than from imports could therefore be blocked from future oil and gas licensing rounds, the document suggests.

Other climate tests mooted today include green investment targets for developers to incentivise support for energy transition technologies such as carbon capture utilisation and storage (CCUS) and hydrogen, and a requirement for setting value chain emissions goals, also known as Scope 3 targets.

A test that aims to take account of the ‘global production gap’ between fossil fuel extraction and the 1.5C target set out in the Paris Agreement is also under consideration, according to the Department for Business, Energy and Industrial Strategy (BEIS).

Energy and Climate Change Minister Greg Hands argued oil and gas would continue to play a key role in the UK’s energy sources in future, and that utilising domestic fossil fuel reserves could support jobs and boost domestic energy securing by reducing reliance on imports.

“This new checkpoint will be key to our plans to support the oil and gas sector during its net zero transition,” he said. “It helps safeguard the future of this vital UK industry as we create more opportunities for green jobs and investment across the country.”

The government has insisted that if evidence shows a future licensing round for new oil and gas extraction in UK waters would undermine the country’s climate goals – including the 2050 net zero target – then the project would not be allowed to go ahead.

However, in its landmark net zero report commissioned by the UK government earlier this year, the International Energy Agency (IEA) made it clear that no new fossil fuel extraction projects can be developed at all if the world is to stand a chance of limiting average temperature rise to 1.5C.

That the UK government – which still holds the COP26 presidency after hosted the UN Climate Change Summit in Glasgow last month – is still considering the development of further oil and gas reserves in the North Sea has therefore faced criticism from climate campaigners. They argue that no new oil and gas projects are compatible with net zero, thus rendering any checkpoint assessment process for future licensing rounds redundant.

COP26 also saw the launch of the Beyond Oil and Gas Alliance, with 10 countries including Costa Rica, Denmark and Wales pledging to phase out oil and gas altogether before 2050.

Greenpeace UK’s policy director, Dr Doug Parr,  disparaged the ‘climate compatibilty checkpoints’ proposed today by the government.

“The government has produced some detailed, concrete suggestions for various tests that might be favoured by industry, but not on actual compatibility with the climate crisis we’re in, where it is infuriatingly vague,” he said. “A real climate compatibility test would bring an end to new oil and gas licences, and accelerate our progress towards cleaner energy and a just transition for oil and gas workers. If the UK wants to make any claim of climate leadership, it’s hard to see how it can do anything else. “

Other campaigners pointed out that the new requirements only affect future additional oil and gas projects, but would have no impact on the many existing UK oil and gas fields.

Uplift founder and director Tessa Khan said the UK’s oil and gas “taps will to flow for years to come even without new licenses”.

Just to be clear, the 200+ oil & gas fields under existing licences in the UK, both in production & up for approval, contain 6+ billion barrels of oil gas and will keep production going well into the 2030s. The taps will flow for years to come even without new licences.

— Tessa Khan (@tessakhan) December 20, 2021

But the government argues the new checkpoint it is seeking to develop will provide an extra layer of scrutiny for future oil and gas licenses on top of existing measures, such as environmental and net zero impact assessments carried out by the Offshore Petroleum Regulator for Environment and Decommission (OPRED) and the Oil and Gas Authority respectively.

Moreover, BEIS today stressed that “we recognise the important role that oil and gas will play over the coming decades as the UK transitions to low carbon solutions”, adding that its independent advisors on the Climate Change Committee (CCC) also acknowledge that “the transition to non-fossil forms of energy cannot happen overnight”.

“This checkpoint will enable oil and gas to provide important security for the UK’s energy mix, and to be used for the production of many everyday essentials like medicines, plastics, cosmetics and household appliances, while minimising emissions,” BEIS said.

The North Sea Transition Deal brokered earlier this year sets out how the government and the UK’s oil and gas sector plan to work together to develop skills, innovation and new infrastructure to help meet stretching new decarbonisation goals, with the promise of £14bn-16bn investment in new greener energy technologies by 2030.

The Transition Deal followed a review carried out by BEIS in autumn 2020, which concluded that the award of new oil and gas licenses in the UK was consistent with the country’s wider climate and net zero objectives.

However, the industry is facing growing societal and investor pressure to accelerate its shift away from oil and gas, with Shell most recently pulling out of the controversial Cambo oil project in the North Sea after questioning the economics behind the development. The project has since been put on ice.

Scotland’s First Minister Nicola Sturgeon also said she did not believe the Cambo project should go ahead due to the UK’s need to deliver its net zero goals.

But the UK government’s Minister for Scotland, Malcolm Offord, stressed that it was working closely with the industry in the North Sea on the Transition Deal to help address climate concerns while also protecting and creating jobs.

“The UK government fully supports the oil and gas industry in its transition away from fossil fuels to cleaner, greener energy sources, such as wind and tidal power,” he said. “Until we have sufficient supply in those areas, maintaining a domestic supply of oil and gas – albeit reduced – will be necessary.”

He added: “It will all help us accelerate towards a fully green sector in line with the Prime Minister’s 10 Point Plan and our robust 2050 net zero goals.”

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