The flood-waters are slowly receding. Communities across the country are still struggling to regain a sense of normality after the wettest winter on record. Questions are being raised about extreme weather in the UK, how prepared we are to deal with it, and whether or not this is a taster of things to come. You’re the Prime Minister. Do you:
a) Seize hold of your “Katrina moment” with both hands, responding to public anxiety around weather instability in order to deliver your promise to be the “the greenest government ever”, by announcing bold new measures to expand renewables infrastructure across the country, slash emissions and create thousands of green jobs?
b) Announce a new package of political support and subsidies for the North Sea oil and gas industry, using ever more public resources to squeeze the last dregs out of wells, entrench ourselves further in a carbon-intensive economy, boost the already-not-inconsiderable profit margins of the fossil fuel sector, and try to score a few cheap points in the Scottish independence debate?
Alas, dear reader, real-world Dave has plumped firmly for ‘b’. On Monday he announced that:
By accepting and fast-tracking all the main recommendations of Sir Ian Wood’s ground-breaking review into maximising North Sea revenue, the government can support the industry to recover 3 to 4 billion more barrels of oil than would otherwise have been produced.
The news is especially galling as alongside groups like Friends of the Earth, Avaaz and Greenpeace, today we’ve delivered a petition to Number 10 with thousands of signatures calling for Cameron to cut fossil fuel subsidies in response to the flooding crisis. Cutting fossil fuel subsidies isn’t controversial – it’s common sense. George Osborne agreed with the rest of the G20 countries in Mexico in 2012 to phase them out, and a whole host of institutions from the International Energy Agency to the World Bank have identified them as a serious obstacle on the road to effective climate action.
Subsidies in themselves aren’t necessarily a bad thing. They’re another tool in the political toolbox and it’s all a question of how you use them and to what end. The problem is that despite the urgent need to transition quickly to a low carbon economy, the government is using the tool to aggressively promote North Sea oil and fracking in the UK. Both have received extraordinarily generous taxbreaks and a huge degree of political support this last year. In contrast, on almost the same day as Cameron’s announcement, the quarterly “Renewable energy country attractiveness index” by Ernst & Young showed that the UK had slipped down the rankings, “hampered by political infighting and mixed policy measures.” Britain’s renewable energy resources are woefully under-developed compared to countries like Germany and Spain. Yet the government is offering scant support to clean energy while oil and gas walk away with tax breaks and political subsidies worth billions.
Cameron’s North Sea oil support and the much-publicised Cabinet meeting in Aberdeen is of course taking place against the backdrop of the debate around Scottish independence. Cameron says that Scotland needs the “broad shoulders” of the UK to support the industry, with the recent support pledges apparently underscoring his point. Alex Salmond has referred to his time working in the oil industry while Cameron “was fooling around on the playing fields of Eton”.
Former Ambassador Craig Murray has an interesting take on Cameron’s figures.
Am I the only one who wonders why the taxpayer, under Cameron’s plan, the taxpayer – ie you and me – should fund $20 billion to decommission oil platforms when the oil companies made, at today’s values, over $400 billion in straight profit from those platforms? That payment to the oil companies constitutes 83% of the money from the UK which Cameron claims an independent Scotland would miss out on. The money would not actually go to Scotland at all – it would go to British Gas, BP, Shell, Exxon and other such needy people, to compensate them for polluting us (sic!).
If “pump it out fast and sell it cheap” was the only criterion of success, then the UK has indeed done a sterling job of managing North Sea oil. Norway and the UK found comparable amounts of oil and gas in the North Sea at roughly the same time. In January, everyone in Norway became a theoretical millionaire as the country’s sovereign wealth fund — the largest in the world – soared to a new high. The fund collects taxes from oil profits and re-invests the money, with the government only allowed to use 4% of it a year.
In contrast, the UK government spent much of its North Sea oil and gas revenues underwriting Thatcher’s restructuring of the economy. According to Money Week magazine:
The money that flowed into the Treasury’s coffers was crucial to enabling the Government to bear the cost of rising unemployment. Some economists believe that, without North Sea oil, the Thatcher Government might have been forced to abandon the strict monetarist economic policies that caused interest rates to rise to punitive levels in the early 1980s, and to scale back Thatcher’s confrontation with the unions and privatisation programme, both of which contributed to soaring unemployment.
Regardless of whether Scotland should or shouldn’t become independent, what has characterised much of the ‘Yes’ campaign has been an exciting discussion of possibility and the creative intoxication of “what if’s” rather than the sterility of “it has to stay the same.” Hopefully we can use that same political imagination to conceive of either a Scotland or a United Kingdom that has weaned itself off the North Sea.
If Scotland were to secede from the UK, its long term interests would be far better met by a thriving renewables energy sector to see it sustainably and profitably into the future, rather than over-dependence on the last dregs of a dirty, dated fuel source.