BP has angered climate campaigners for increasing shareholder payouts rather than investing in greener energy, ITV News' Business and Economics Editor Joel Hills reports
A highly respected climate economist says the government’s decision to issue new oil and gas licences in the North Sea is incompatible with the UK’s commitment to Net Zero emissions.
Lord Nicholas Stern, a cross-bench peer, described the announcement as “a bet on the failure of international agreements to tackle climate change, because if these licences prove profitable when the fields start producing in nine, ten years’ time or more, then it will be because we haven’t managed to rise to the challenge of delivering on the Paris agreement”.
Stern is Professor of Economics at The London School of Economics (LSE) and Chair of Grantham Research Institute on Climate Change and Environment at the university.
He is also author of the Stern Review on Climate Change, which was commissioned by the UK government and published in 2006.
Yesterday, when the prime minister confirmed plans to grant hundred of new licences to exploit North Sea oil and gas reserves, Rishi Sunak presented it as a drive to make the UK more energy independent and to protect 200,000 jobs in the industry.
The announcement included a commitment to build two new carbon capture and storage facilities in North East Scotland and the Humber.
Stern told ITV News that, in his view, the argument that the extra licences would improve the UK’s energy security is “vacuous”.
“Issuing more North Sea licences will do next to nothing for security or for world prices,” he insisted.
“Indeed, by increasing the supply of oil and gas you increase consumption and worsen climate change.
"It’s an attempt to play politics with the future of the planet. It makes no sense and is reckless with the prospects of our children and grandchildren.”
Nick Stern has been publicly critical of the government’s climate policy in the past.
In January, he described approval for a new coal mine in Whitehaven in Cumbria as “a mad idea”.
Stern’s view is the government is not doing enough to deliver on the public and legally binding pledges it has made to tackle climate change.
But he also thinks that sky high oil and gas prices have weakened the resolve of many energy companies to deliver on theirs.
Russia’s invasion Ukraine caused a spike in the global market price of oil and gas which has generated colossal profits for energy producers in particular.
The billions of pounds which fell from the sky were an opportunity for them to move more quickly towards Net Zero.
Generally speaking, they have chosen instead to use the windfall to reward to shareholders and lower their debts. BP is no exception.
The company has steadily increased the amount of money it invests in what it calls its “Transition Growth Engines”, but in the first six months of this year three quarters of its capital expenditure went on the production of fossil fuels.
Of the $2.1 billion which was spent on the “transition” almost half was spent on building up and improving its global network of forecourts and convenience stores.
The rest was divided between the installation of EV charge points, the development of hydrogen, biofuel and renewables (solar and wind power).
BP is currently producing oil and gas at a rate of 2.3 million barrels of oil a day - an increase on last year and the year before.
The company plans to lower output to 2 million barrels a day by 2030 but that target was raised in February from 1.5 million barrels a day.
“BP was a leader in action on climate change, it’s such a shame that it is now wobbling so seriously on this,” says Lord Stern, “[the company] shouldn’t be increasing its investment in fossil fuel extraction, it should be using what are essentially 'war profits' to move more quickly towards Net Zero.
"By the time new oil and gas investments come to fruition, in 8, 9, 10 years or more, the world will need to be using less oil and gas. BP risks creating stranded assets and stranded employment.”
BP declined to comment on Nick Stern’s remarks but the company expects to be spending 50% of its capital investment on its “transition engines” by 2030.
Its stated aim remains to be “Net Zero” across its operations, production and sales by 2050 or sooner, a target it believes is ahead of the rest of the industry.
The Department for Energy Security also declined to comment and pointed us to yesterday’s press release.
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