The UK investment industry has warned that the prime minister’s approval of more oil and gas licenses is sending “entirely wrong signals” to investors on the credibility of the UK’s plans to reduce carbon emissions.
On Monday, UK prime minister Rishi Sunak approved over 100 new licences for North Sea oil and gas drilling. The move is expected to make the UK “more energy independent”, according to the government.
Sunak said: “We have all witnessed how Putin has manipulated and weaponised energy – disrupting supply and stalling growth in countries around the world.
“Now more than ever, it’s vital that we bolster our energy security and capitalise on that independence to deliver more affordable, clean energy to British homes and businesses.”
Sunak added that even when the UK reaches net zero in 2050, a quarter of the country’s energy needs will come from oil and gas, pointing out that there are people who would rather it come from “hostile states” than from the supplies “we have here at home”.
He continued: “We’re choosing to power up Britain from Britain and invest in crucial industries such as carbon capture and storage, rather than depend on more carbon-intensive gas imports from overseas – which will support thousands of skilled jobs, unlock further opportunities for green technologies and grow the economy.”
The new licences process, overseen by the North Sea Transition Authority, will involve a climate compatibility test, but will have more flexibility than before to drill for reserves close to currently licensed areas.
And while the government’s aim is to make the UK more energy independent and it argues that the new licences are consistent with net zero commitments, investors have warned that this move is sending “entirely the wrong signals to investors on the credibility of the UK’s plans to reduce carbon emissions”, according to James Alexander, chief executive officer for the UK Sustainable Investment and Finance Association (UKSIF).
He said: “This is especially in light of the [International Energy Agency] IEA’s statement that new oil and gas projects should not be funded if the world is to achieve net zero by the middle of this century.”
The Intergovernmental Panel on Climate Change and the United Nations issued similar statements in the recent months.
Alexander continued: “For large-scale capital to flow to low-carbon technologies and climate solutions, policymakers must build investor confidence by demonstrating their commitment to delivering a sustainable future, with all the economic benefits this brings.”
Faith Ward, chief responsible investment officer at Brunel Pension Partnership, pointed out that while the importance of energy security is clear, this action “reiterates the confusing policy signals being sent to investors”.
She said: “We believe more consistent, supportive and decisive decision-making in the permitting of low-carbon energy, power storage and grid capacity would be more beneficial to the UK now, not just in the long-term.”
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