Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Even by the usual standards of governments a year away from an election, Prime Minister Rishi Sunak’s legislative agenda unveiled in Tuesday’s King Speech is thin gruel. Given the scale of challenges facing the UK, it is especially unfortunate that it put so much focus on drawing short-term political divides with the Labour opposition. Nowhere is this more evident than in the plan to mandate annual licensing rounds for North Sea oil and gas drilling. This is unlikely to significantly slow the decline in production from a dwindling reserve — even if the Conservatives manage to win the election. But by playing politics over the energy transition it further dents the UK’s reputation as a leader on climate change.
The government bills the move as promoting UK energy independence, and evidence of Sunak’s more “pragmatic, proportionate and realistic” approach to meeting its 2050 net zero target since he watered down key policies in September. Though briefly paused for a review a couple of years ago, however, North Sea licensing rounds take place fairly regularly. Using scarce parliamentary time to legislate to hold them annually changes little — but is a way of forcing Labour to repeal the law if it wants to go ahead with its plan to stop new drilling.
Energy companies will surely not alter investment plans for now but will wait to see what happens at the next election. Even if the Conservative government — and the new law — survive, the North Sea is a declining province many of whose best assets are tapped out. It will have to compete for investment, in an era in which global fossil fuel demand is forecast soon to have peaked, with newer and more attractive regions. Continued licensing rounds are likely at best to make the slope of decline a little less steep. The impact in terms of preserving jobs and tax receipts, and displacing “dirtier” imports of liquefied natural gas, is likely to be limited.
A sounder way to bolster energy security would be to bear down much harder on demand for oil and gas, and go all-out to expand homegrown clean energy sources. Instead, the Sunak government recently delayed a ban on the sale of petrol cars and eased the transition away from gas boilers. It ought to be organising mass home insulation schemes, advancing the switch to heat pumps, promoting solar energy and removing blocks on onshore wind. While the King’s Speech did mention efforts to secure “record” investment in renewables and improve grid connections, the waters were muddied by the twin focus on domestic oil and gas.
The UK Tories are not alone in making political capital out of the “green backlash” intensified by the cost of living crisis. Parties, particularly of the right, have been doing the same in Europe and the US. The government points out, too, that the UK has a strong climate record, having cut emissions by more than any G7 country and, in 2019, becoming the first big economy to enact a binding net zero pledge.
None of that makes Sunak’s dilution of climate policies less regrettable. It also adds to the chopping and changing of policymaking that investors cite as a big disincentive to put money into the UK. That looks particularly short-sighted given the volume of private capital globally now looking for a home in supporting the green transition.
Three weeks ahead of the COP28 climate conference in the United Arab Emirates, moreover, Britain will now struggle to speak with the same authority as when it hosted COP26 in Glasgow in 2021. The impression that wealthy economies such as the UK are treating climate change with less urgency than before — and trying to hang on to what they can of fossil fuel production — will only make it harder to persuade developing countries to forgo the carbon economy.
