The North Sea region must lead the just transition of the oil and gas industry

The views expressed are those of the author and do not necessarily reflect the position of FORESIGHT Climate & Energy

The three nations have similar climate ambitions but are taking different approaches to phase out oil and gas

The oil and gas industry is the next frontier for closing the gap between climate ambition and policies. The world does not have much time to take action: All countries will need to stop exploring new oil and gas fields this year if the world wants to stay on the narrow pathway to limiting global warming to 1.5°C, the IEA’s Net Zero Roadmap released in May 2021 found.

If there is one part of the world that has the resources and can garner the political will to initiate plans for phasing out oil and gas while minimising the social costs of the transition, it is the North Sea region. It is a matter of credibility and responsibility, particularly for the UK as the host of this year’s UN Climate Change Conference (COP26). However, governments are far off track.

Despite their ambitious climate commitments and greenhouse gas emissions reduction targets, both the UK and Norway, for example, do not have plans to phase out oil and gas production. To be consistent with the Paris Agreement’s ambition to limit global warming to 1.5°C, oil and gas production between 2020 and 2030 would need to fall annually by 4% and 3%, respectively.

Yet current production plans and forecasts predict an average annual increase of 2% over the same period. The UK government is considering approving a new oil and gas field in Scotland. Similarly, producers in Norway have plans to develop new fields and continue production beyond 2050 (even though a new government might change the licensing regime).

Ahead of the COP26 summit, this is the right time for governments in the North Sea region to close the gap between international climate leadership and domestic action by setting phase-out deadlines for oil and gas exploration and extraction as well as putting the right regulations in place for a just transition.

JUST TRANSITION

The region can become a first mover and example for the world in collectively agreeing on a fair and effective sunset for the oil and gas sector. Not to mention that it could pioneer developing the skills, technologies and infrastructure of the green economy—valuable knowledge which the region’s companies can export to other countries.

Denmark’s Energy Islands in the North Sea, for instance, will become the first of its kind in the world, eventually allowing to cover all of the country’s electricity needs through offshore wind while also producing green hydrogen from seawater. Excess electricity will be stored in batteries on the island and could be exported.

The oil and gas economies of Norway, Denmark and the UK are interconnected and their governments share similar climate ambitions. Still, the three countries apply different policies and are all at different stages of the transition. Denmark has already made plans to phase out oil and gas production by 2050 and has recently taken the lead within the Beyond Oil & Gas Alliance.

Norway, with its large sovereign wealth fund, is uniquely positioned to diversify its economy, reskill workers and demonstrate to other countries that it is possible to transform an economy heavily dependent on fossil fuels. Today, the oil and gas phase-out is finally leaving behind its status as a taboo subject. Yet, it is far from becoming a government priority. Recent parliamentary elections, however, may see a new government restrict the exploration of new oil and gas fields.

In the UK, the oil and gas sector is a declining industry. Yet, the COP26 presidency needs to translate its climate ambition into concrete and credible domestic action, building on its positive track record in transitioning towards a net-zero economy. The devolved Scottish government’s Just Transition Commission has set a benchmark to engage different stakeholders in the conversation. Also, an organised coalition of civil society groups is currently advocating to stop new licensing immediately, increasing pressure prior to COP26.

NEXT STEPS

To initiate rapid change, we need credible and evidence-based transition scenarios. They need to consider the interests of all relevant stakeholders, including workers, local communities, small and large companies and investors.

By engaging with a new research initiative—Oil & Gas Transitions—Norway, Denmark and the UK can demonstrate their leadership in participatory policymaking by looking into the need, barriers and opportunities for a just transition of their oil and gas sectors.

Doing so would prove to the world that consensus-building on just oil and gas transitions is possible. The next few years will show which countries—in the North Sea region and globally—will turn into true climate champions.

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