Tag Archives: net zero

Oil’s not well for Net Zero: what do the new fossil fuel licenses mean for emissions targets?

GK interns Olivia Warr and Yusaf Hassan take a deep dive into what the new North Sea oil and gas exploration licenses mean for the UK’s net zero targets. 

The Prime Minister’s announcement that the Government would grant 100 new North Sea oil and gas licenses was met with dismay by both climate activists and the Opposition, with Shadow Climate Change Secretary, Ed Miliband, arguing that Sunak’s “weak and confused policy… will do nothing for our energy security and drive a coach and horses through our climate commitments”.

The Prime Minister positioned the move as a refusal to bow down to dictators threatening the UK’s energy security. However, the announcement comes amid a broader shift under Sunak’s watch to less enthusiasm for costly green policies following the Conservative Party’s narrow win in the Uxbridge and South Ruislip by-election – largely attributed to the unpopularity of Labour Mayor Sadiq Khan’s ULEZ expansion. Having already spent months criticising Labour over funding links to activist group Just Stop Oil, No.10 sees the cost of meeting certain green commitments as a clear attack line for the upcoming election season.

The Conservative Party’s messaging will have to be precise, however, to not risk losing control of the narrative. Net zero has huge support among the electorate (a recent YouGov poll had support for the 2050 target at over 70%) and among a large portion of backbench Conservative MPs. If the Prime Minister is seen to be reneging on the Government’s emission-cutting commitments, it could become disastrous for his electoral prospects. What he hopes to exploit, though, is the unease about personal lifestyle or financial implications of certain policy initiatives – as evidenced by the strength of opposition to the ULEZ policy expansion. Sunak hopes to portray himself as the common-sense candidate during a cost-of-living crisis; not taking radical action to hurt people’s bank accounts and showing Keir Starmer to be in the pocket of climate radicals who will hurt the economy for their own agenda.

He will be nervously gauging the reaction of his party. Already, the influential Conservative MP, Chris Skidmore, who recently completed an independent review of the Government’s net zero policies, has slammed the plan, stating it is “on the wrong side of the future economy”. Tory MPs at risk from Liberal Democrat challengers at the next General Election may also be concerned about the opinions of their environmentally conscious constituents. Young people, too, are unlikely to be enamoured by Sunak’s pivot as mainland Europe feels the heat of the climate crisis.

The extent to which Labour can attack the Government’s policy is limited, however, after the Party confirmed they would not revoke any of the licenses issued. This has been seen by some as implicit approval of the plan and perhaps an indication that they quietly also see it as a necessary evil to ensure energy security.

But to what extent will the policy announcement achieve its energy security objectives?

The claim made by the Government is that sourcing oil and gas closer to home would reduce emission production by three to four times whilst lowering import costs. Sunak argues that, given the UK is still forecast to be reliant on fossil fuels for one quarter of its energy needs by 2050, the new licenses would not jeopardise the net zero target. Meanwhile, investing in a Carbon Capture Cluster (CCS) through the Acorn Project in Scotland provides the infrastructure to decarbonise North Sea activity, mitigating those emissions that will result from the new drilling sites, while also generating jobs and investment in Northern Scotland.

However, Sunak’s proposal raises some questions. In terms of tackling the cost-of-living crisis and cementing energy security, there’s no guarantee that the newly extracted oil and gas will be cycled directly into the UK market to provide any benefits. The Climate Change Committee in their 2023 report to Parliament suggested there would be minimal impact on domestic prices from this investment. The North Sea Transition Authority (NSTA) also explained that it would take a minimum of five years before sites could become operational – reducing the short-term benefits of the scheme. Furthermore, while the £1 billion dedicated to the CCS is a mitigatory step in reducing emissions, Sunak has refused to be drawn on whether the development of the infrastructure will be sufficient to match the increased emissions, nor has he committed the extraction licences to be conditional on the emissions’ removal.

It remains to be seen whether the current Government – or indeed any future governments – will be able to make significant progress towards the legally-binding net zero target with the lighter touch, less intrusive approach that Sunak is leaning towards in his bid to keep voters onside, or whether the Prime Minister will be forced to take more dramatic, potentially unpopular, action to ensure the goal is met. The UK’s reputation as a global leader in setting climate change goals is strong, following on from a successful COP summit in Glasgow two years ago, but its ability to deliver on them hangs in the balance.

GK Insight: What does the Liz Truss premiership mean for the UK’s net zero agenda?

GK consultants Sam Tankard and Milo Boyd assess the potential ramifications of a Liz Truss government for the UK’s net zero commitments, and what conclusions can be drawn from the ministers appointed at the Department for Business, Energy and Industrial Strategy. Take a look at the analysis here: What does the Liz Truss premiership mean for the UK’s net zero agenda?

Demystifying ‘net zero’: How to invest in the future

‘Net zero’ has become very topical and an increasingly mainstream issue. As one of the Government’s flagship policies, the Net Zero Strategy and related initiatives, such as the Heat and Buildings Strategy, may encourage many businesses and investors to look more closely at Government activity in decarbonisation and energy efficiency.

Last month, GK Strategy hosted a roundtable discussion with keynote speaker, Dr Alan Whitehead MP, Shadow Minister for Energy and the Green New Deal. As ESG specialists, GK pride ourselves on working with investors and organisations that value and demonstrate the importance of sustainability policies.

We strongly believe that the investment community has a vital role to play in the net zero agenda.

GK co-founder and executive chairman, Robin Grainger, asked Dr Whitehead and other participants some important questions about what ‘net zero’ looks like practically, how the investment community can help the Government achieve its targets, and what is the new Government’s take on the net zero agenda.

Beginning the discussion, it was clear that net zero policies are here to stay. The shadow minister expressed his desire for a greater adoption of net zero as a ‘state of being’ rather than simply being an aspiration. He said that it should become a constant in the economy, and ultimately the basis upon which the entirety of the economy operates.

Dr Whitehead outlined where he thought the UK was doing well and where it was lagging behind. He said that one area which required much more attention was that of land use, and land use change, to ensure that food systems were resilient to shocks.

He went on to say that the UK was generally performing quite well on low carbon energy, partly due to some very ambitious plans from the Government. He also noted that the UK was beginning to develop a more effective carbon capture and storage economy, which would be particularly important for high-emitting industries in the future and could eventually be used to support hydrogen production.

The Government came in for criticism on its attitude towards infrastructure, arguing that it was not realistic enough, and did not account for the need to have necessary infrastructure in place well before the net zero goal of 2050.

The Labour frontbencher stated he believed that the UK is also ‘woefully deficient’ with regard to its grid system as a result of the historic focus on fossil fuel-orientated energy, which has meant that the increasingly necessary transmission of clean, renewable power from the British coastlines to inland regions is made more difficult.

We also heard Dr Whitehead explain Labour’s proposals for net zero, which were firmed up at the recent Labour Party Conference in Liverpool last month. Labour would support the current landscape by:

  • creating a £180 billion green investment fund that would drive development of infrastructure, lead the electric vehicle (EV) revolution, and help Britain lead the world in hydrogen;
  • giving more of a focus to the demand side of energy, seeking to use energy in a smarter way through a big retrofit programme;
  • joining up more of the thinking currently emerging from Government, simultaneously aiming to ensure that projects could be run at the local level.

Comparing this to the new Conservative Government under Prime Minister Liz Truss, there seems to be a greater Labour commitment to the net zero agenda. These measures targeting investment, especially in the demand side of energy, and associated job creation, seem like a good start.

With the Truss Government’s approval rating, and that of the whole Conservative Party, declining sharply in recent weeks, it would be useful for investors and businesses to begin, or continue, their dialogues with influential Labour policymakers.

The discussion last month cemented the fact that net zero policymaking is here to stay, even under a pro-fracking Truss Government, and certainly under a Labour administration. Private equity firms and other investors should take government policies seriously and consider investing in the ‘green transition’. Dr Whitehead advised against investing in the ‘brown economy’ and into areas that are likely become stranded assets.

He concluded that it will hardly be a ‘feast or famine’ situation for the investment community as the UK continues to transition to a fully green economy. In his view, there would undoubtedly be many opportunities that will arise with the advent of a green economy, with new markets opening up and new technologies to support.

GK provide expert advice for investors and business leaders looking to take advantage of the green economy; to learn more about it and the transition to net zero, please contact milo@gkstrategy.com.

About GK Strategy

GK Strategy is a political consultancy based in the heart of Westminster. We support private equity in their due diligence process by advising on deals and producing political due diligence reports, identifying any risks to an asset in the deal process.

GK Strategy also provide strategic communications support to companies once the deal process is complete.