Accelerating the transition from fossil fuels and securing energy supplies EAC Report 4 2023

1 Introduction
2 Context
3 In brief
4 Summary points
5 Terms of reference
6 Related articles on Designing Buildings

[edit] Introduction

This report is the outcome of an inquiry with a supporting call for evidence on the same topic which was launched by the Environmental Audit Committee (EAC) and ended on May 6 2022.

[edit] Context

The context of the inquiry was the UKs dependence on fossil fuels to generate electricity, heat the majority of homes and fuel vehicles. The surge in oil and gas prices followed the invasion of Ukraine, and rises in costs for heating, power and transport, impacting inflation and disproportionately affecting lower household incomes. The Prime Minister has suggested that a “transitional” increase in domestic hydrocarbon production, is aimed at addressing energy security concerns whilst including measures to accelerate the transition to net zero emissions. A proposed “Climate Compatibility Checkpoint” is being suggested before any future licensing rounds for oil and gas extraction.

International commitments on sustainable energy and fossil fuels:

2016 the G7 pledged to end most fossil fuel subsidies by 2025.
United Nations Sustainable Development Goal (SDG) 7 commits the UK to ensure access to affordable, reliable, and sustainable energy for all.
UNSDG 12 commits the UK to phasing out harmful subsidies, where they exist, to reflect their environmental impacts.
COP26 committed the UK to "phasing down" inefficient fossil fuel subsidies.

[edit] In brief

The report focusses on energy security through supply security rather than in combination with efficiency measures to reduce demand. A missed opportunity in the summer months to implement measures means tax payers are subsidising high fuels costs and using the same levels. Investment in energy efficiency measures should be made now in a national ‘war effort’ on energy saving and efficiency.

There has been too much focus on certain technologies, but detail lacking for wind and tidal. The suggestion is to at least give renewable technologies the same 45% tax breaks given to the oil and gas industries and to be specific in terms of Gigawatt targets. The UK must still have transitionary access to oil and gas but a date must be agreed to end new oil and gas licensing. The routine flaring of unwanted fossil gas must be banned outright, as it has been by Norway since 1971.

Solutions to this energy crisis can deliver synergies between affordability, security and sustainability. Accelerating the transition away from fossil fuels will enhance the UK’s energy security, shield households from future energy shocks, and reduce the ability of aggressive and repressive regimes to use oil and gas supplies as economic weapons.

[edit] Summary points

[edit] Current crisis

The UK remains dependent on fossil fuels for 78% of its energy needs, leaving it exposed to the biggest global fossil fuel price shock since the 1970s.

The invasion of Ukraine, weaponisation of gas supplies caused oil, gas, petrol and diesel to hit record levels and household energy bills have soared.

Energy bills would have reached higher levels had the Government not intervened to temporarily cap the unit price of gas and electricity, preventing nearly four million people from falling into fuel poverty this January.

[edit] Swift action commended

The Government was commended on publishing the British Energy Security Strategy and intervening to protect people and businesses following the invasion of Ukraine and the resulting gas supply crisis.

The ambition to decarbonise the electricity system is welcome, and sets strong and stretching targets for the roll-out of low-carbon electricity generation from solar, offshore wind and nuclear.

[edit] Efficiency gaps

However, significant gaps in the strategy, in essence an energy supply strategy, with a focus on electricity generation and oil and gas supply. To deliver genuine energy security, the strategy should have placed far greater emphasis on energy saving measures and the transport sector should also have been included.

Boosting energy efficiency efforts is the quickest way to reduce reliance on imports, protect households and cut climate-changing emissions, a crucial window of opportunity during the warmer months to accelerate energy efficiency measures has been missed.

The number of energy efficiency installations in 2022 compares poorly with figures from Government backed energy efficiency schemes eight to ten years ago.

The target set to reduce energy demand by 15% by 2030 is welcome as is a promise of £6bn future energy efficiency funding, but those in fuel poverty cannot afford three winters of delay. It is a false economy to hold this money back when households are struggling and the taxpayer is subsidising energy bills.

The Chancellor should allocate a proportion of the Energy Profits Levy revenue to bringing forward this energy efficiency funding now to fulfil the Government’s manifesto commitment to invest £9 billion in energy efficiency. A national ‘war effort’ on energy saving and efficiency is required. Upgrading homes to Energy Performance Certificate C or above must be treated as a national priority to enhance the UK’s energy security, reduce bills and cut emissions from the country’s leaky and draughty building stock.

[edit] Wind and tidal gaps

The short-term potential of onshore wind and the long-term potential of tidal power were not given as much focus as other technologies.

Government’s commitment to consult on proposed changes to national planning policy to relax prohibition for onshore wind that has existed since 2015 was welcomed, while recognising that constraints remain.

In its Net Zero strategy the Government should set stated ambitions for accelerating the transition from fossil fuels and securing energy supplies, onshore wind and tidal energy in gigawatts of generating capacity as it has for other low-carbon technologies like solar, offshore wind and nuclear.

[edit] Equal tax breaks

The Treasury should examine how a low-carbon investment allowance could be introduced for electricity producers paying the new temporary tax of 45%, similar to the one that applies to oil and gas producers. Tackling the immediate energy security and affordability issues caused by the war in Ukraine does not entail abandoning climate ambitions or putting them on pause.

During the net zero transition the UK must nevertheless continue to be able to access oil and gas to ensure that the country can heat its homes, fuel its transport and generate a declining proportion of its power.

[edit] End new oil and gas licensing

The Government should consult on setting a clear date for ending new oil and gas licensing in the North Sea, well before 2050. The current upstream emissions reductions targets under the North Sea Transition Deal are not stretching enough. More rapid action will be required to reduce production emissions by 68% in the current decade in line with the Government’s commitments under the Paris Agreement. Oil and gas companies must accelerate efforts to electrify offshore platforms, stop flaring and address methane leakage.

It is disappointed to observe that only two electrification projects are expected to be commissioned by 2027.

[edit] Ban routine flaring

The North Sea Transition Authority should use its powers to insist on the electrification of all new oil and gas projects due to be licenced in the 33rd licensing round. The routine flaring of unwanted fossil gas must also be banned outright, as it has been by Norway since 1971.

There are many solutions to this energy crisis that deliver synergies between affordability, security and sustainability. Accelerating the transition away from fossil fuels will enhance the UK’s energy security, shield households from future energy shocks, and reduce the ability of aggressive and repressive regimes to use oil and gas supplies as an economic weapon.

[edit] Terms of reference

The Committee invited written submissions, addressing any or all of the following issues raised in the following terms of reference.

Securing sustainable energy supplies and protecting households from high prices
How effective will the Government’s Energy Security Strategy be: at reducing reliance on oil and gas at the pace required to limit global heating to 1.5 degrees; securing alternative energy supplies; and protecting households from high fossil fuel prices?
Should Government policies on onshore energy generation or exploration be revised in light of the energy security situation? Given the current and potential speed of deployment, what low-carbon energy sources are most likely to secure supplies of affordable and sustainable energy rapidly?
Is the Government doing enough to protect the high number of households likely to fall into fuel poverty as a result of high fossil fuel prices over the coming year? To what extent, and how rapidly, could energy saving or efficiency measures help to reduce reliance on oil and gas and relieve fuel poverty?
Which elements of the International Energy Agency’s 10-point plans to Reduce Reliance on Russian Natural Gas and Cut Oil Use are relevant to the UK and which could the Government seek to implement as a priority?
What impact will high prices for oil and gas have on production and the net zero transition? What are the pros and cons of a windfall tax levied on fossil energy producers? How should the revenue from any levy be allocated?
Should the Government continue to provide tax reliefs or financial support to the fossil fuel industry, such as the ring-fence corporate tax relief for new oil and gas fields?
How can Government phase out support for fossil fuels whilst most effectively supporting households through the transition?
Can the UK’s oil and gas reserves be exploited while limiting global temperature rises to 1.5c in line with the Paris Agreement?
Is carbon capture and storage technology sufficiently mature to be deployed at scale in the necessary timescale? What economic opportunities are there in carbon capture in the North Sea? What risks are there to relying on carbon capture technologies?
While the UK continues to use fossil fuels during the transition to net zero, how significant is the environmental or carbon benefit of exploiting domestic oil and gas reserves compared to importing fuels from other major suppliers?
Is the North Sea Transition Deal structured appropriately to meet net zero goals and support a ‘just transition’ for those working within the oil and gas sector in the UK? Is there sufficient independent oversight of the Deal?
Is the North Sea Transition Deal genuinely compatible with the UK’s current domestic carbon targets and international obligations? How rigorous is the proposed Climate Compatibility Checkpoint for new oil and gas fields?