Smart policy can help the UK move beyond a zero-sum choice on energy

Life in political office is all about decisions. British Energy Secretary Ed Miliband faces a dilemma in approving two new oil and gasfields in the face of courts and climate campaigners. But smart policy can move this beyond a zero-sum choice.

Rosebank and Jackdaw are two of the largest undeveloped fields in British waters, found in 2004 and 2005 respectively, so waiting a long time for their turn. Rosebank could hold about 500 million barrels of oil, and Jackdaw the gas equivalent of 120-250 million barrels of oil.

The fields were approved for development by the previous Conservative government in autumn 2023 and summer 2022, respectively. Mr Miliband, then in opposition, described Rosebank as a “colossal waste of taxpayer money and climate vandalism”.

Last month, a Scottish court ruled that the approval was unlawful, as it considered only direct greenhouse gas emissions from the fields’ operation, not the downstream emissions from burning the oil and gas they contain.

The governing Labour Party, and Mr Miliband specifically, are stuck in a trap. They are strongly committed to the UK’s “net-zero” carbon plan, and they have a strong environmentalist base among their voters and MPs.

But with public finances in tatters, and facing a challenge from the climate-denying Reform Party as well as the Conservatives, they have pledged to boost economic growth and simplify regulation. They also face criticisms of putting net zero ahead of energy security, affordability and reliability.

The environmentalist case, put by organisations such as Greenpeace, is simple: if the world is on a net-zero path, there is no need for new oil and gasfield developments. The emissions from combusting the hydrocarbons from Jackdaw and Rosebank would add dangerously to global warming, with temperatures already exceeding the Paris Agreement’s 1.5°C targeted limit.

The pro-development case is also pretty straightforward. Rosebank will support almost 1,200 full-time UK-based well-paid and high-skilled jobs. It will add 1 per cent to Scottish gross domestic product at peak production. Maintaining the industrial base of Scotland and northern England is a key objective for Labour. And Rosebank would pay approximately $20 billion in tax over its producing life.

Rosebank’s peak production will be about 75,000 barrels per day – 7 per cent of the UK’s total production, but a minuscule fraction of the more than 100 million bpd produced globally.

Even on its net-zero path, the UK will continue to need and use some oil and gas up to and beyond 2050. If Rosebank and Jackdaw are not developed, the UK will instead import from other countries, worsening its trade deficit and energy security.

There is no shortage of global reserves, so emissions from oil and gas worldwide are determined by demand, not production decisions. The imports could come, directly or indirectly, from suppliers who are geopolitically or environmentally unsavoury to London, including Vladimir Putin’s Russia or Donald Trump’s US.

And the carbon footprint of imported gas, in particular, is much higher than that of indigenous production. Liquefied natural gas requires an energy-intensive process to chill it, then shipping over long distances. Some of the leading suppliers, such as Nigeria, Algeria and the US, are notorious for methane leakage. The UK has full control and visibility on the operational emissions of fields in its water.

The argument is not just about these two fields. Although the UK’s petroleum sector is very mature, there are still fields to develop, such as Cambo, another magnet for controversy, near Rosebank and about half its size. Just on Friday, a small company, Egdon Resources, announced that it had found a huge onshore gas resource in Lincolnshire.

Yet companies will invest barely £3 billion ($3.8 billion) in Britain’s offshore oil and gas industry this year, and on a declining runway to £1.5 billion by the end of the decade. Wealthy neighbour Norway, by contrast, will spend a steady £13.5 billion or so each year, plus about £2.25 billion annually on exploration for new resources, and much of its gas is sold to the UK.

So how does Mr Miliband square this circle?

It is hard to argue that Britain is not doing its bit on climate. It has been the fastest-decarbonising major economy. Its latest submission under the Paris Agreement is one of the few that puts the economy on-track for a net-zero carbon world.

Rather than fighting the same battle on every new oil or gas development, the country needs a systematic principle. The solution could be the “takeback obligation” proposed by Professor Myles Allen, a climate scientist from Oxford University, and advocated by Dutch consultant Margriet Kuijper.

Under this idea, any supplier of carbon fuels to UK users – whether imported or produced at home – would be required to ensure a corresponding amount of carbon dioxide is removed from the atmosphere. This matches the scientific principle that true net zero means not adding any geological carbon to the atmosphere.

This obligation could initially be set at some fraction, say 10 per cent, of the emissions, and increase steadily to reach 100 per cent by the target date of 2050. It could even increase to more than 100 per cent afterwards to clean up past pollution and get back to the 1.5°C world intended by the Paris Agreement. The approach could be co-ordinated at a pan-European level, helping to meet the continent’s climate goals while reviving its energy industries.

Companies could meet this obligation by using fossil fuels in non-emitting ways – for example, with carbon capture and storage (CCS), or conversion to “blue” hydrogen. Or they could remove carbon dioxide from the atmosphere by biological, technological or mineralogical means, such as tree-planting, using “direct air capture” machines or the accelerated weathering of carbon-hungry rocks.

Mr Miliband has promised funding for CCS, which would ensure a sustainable second life for offshore oil and gas infrastructure, and future jobs for today’s petroleum workers. It could also create an export-orientated industry for carbon capture technology and services.

This approach would ensure sustainable and maximal use of the UK’s remaining oil and gas resources. It would end the fruitless legal battles over every new field. And the Labour government could square its climate ambitions with the quest for equitable economic recovery. But it's certainly no bank of roses for those in power.

Robin M Mills is chief executive of Qamar Energy, and author of The Myth of the Oil Crisis