New 'Climate Tests' proposed to align UK oil and gas licensing with climate goals
A new Policy Brief from climate science and policy experts from the University of Oxford and NGO Carbon Balance Initiative offers a potential breakthrough solution in aligning the UK’s oil and gas sector transition with its climate goals.
As the new Labour government has set ambitious climate targets, including a commitment to halt new oil and gasexploration in the North Sea, the authors address a critical challenge: how to manage drilling licences granted under the previous government, which pose a significant risk to the UK's net zero goals and Labour's climate agenda.
The Brief, titled “Paving the way to Net Zero: A New and Credible Climate Compatibility Checkpoint for UK Oil and Gas Production” proposes a science-based framework made up of six ‘Climate Tests’ to scrutinise all future licensing decisions.
It comes at a time when over 40 oil and gas fields have an exploration license but await production decisions - some of which are likely to be made in the next few months. This includes projects like Rosebank, which alone could emit 200 million tonnes of CO2 emissions - more than 28 countries’ annual emissions combined.
Sam Fankhauser, co-author and Professor of Climate Economics and Policy at the Smith School and School of Geography and the Environment, said:
"The policy solutions set out in this Brief provide a pragmatic yet ambitious pathway to manage the decline of oil and gas in line with net zero while supporting a just transition,"
"By strengthening the current Checkpoint with rigorous climate compatibility tests, we can close loopholes that undermine climate progress and create a robust framework for assessing licensing decisions.”
Stuart Jenkins, a research fellow on Net Zero for the Fossil Fuel sector at Oxford Net Zero, stated,
"Our framework is designed to offer flexibility for policymakers. It is able to support diverse government priorities, including goals on climate, energy security, and economic growth.”
The Brief calls for a robust redesign of the government's Climate Compatibility Checkpoint for oil and gas licensing, implemented last year. It finds the current Checkpoint to be inadequate and suggests strengthening it with six ‘Climate Tests’ applied at all licensing stages.
Key recommendations include comparing the full carbon footprint of production to international and UK net zero trajectories, requiring operators to invest in clean energy solutions as a condition of future extraction, and ensuring any remaining fossil fuel production is balanced by permanent geological carbon storage.
The study also weighs in on the debate around the Windfall tax on oil and gas producers, recommending that any tax allowances be tied to investments in renewable energy, hydrogen, and carbon removal to accelerate the net zero transition.
Mirte Boot, co-author and co-director of Carbon Balance Initiative, an NGO founded by former University of Oxford researchers that focuses on advancing evidence-based climate solutions, said:
"As Labour considers changes to the windfall tax, it must ensure operators are incentivised to continue investing in Britain, whilst not giving companies a free pass to continue polluting,"
"Our proposals aim to steer industry profits towards building clean energy, aligning the sector's financial interests with the net zero transition we urgently need."
The briefing further highlights the need for a comprehensive 'fitness test' across UK energy policy to identify and resolve inconsistencies across climate and energy policies. This is particularly relevant following the recent ‘Finch v Surrey County Council’ Supreme Court ruling, which requires Environmental Impact Assessments for fossil fuel projects to account for all emissions impacts, including those from the use of oil and gas (known as 'scope 3' emissions). This ruling has potentially far-reaching consequences for future oil and gas licensing in the UK.
Myles Allen, co-author and Professor of Geosystem Science at the School of Geography and the Environment, said:
"The UK has a historic opportunity to set the gold standard for oil and gas-producing countries around the world,"
"Although the government’s commitment to an exploration ban is a good start, it is not easily replicated elsewhere, with the North Sea basin already in decline. By implementing a rigorous Climate Checkpoint on all oil and gas licensing, the government would showcase true global leadership and provide a blueprint that other countries can follow."
Read the full policy brief: Paving the way to Net Zero: A New and Credible Climate Compatibility Checkpoint for UK Oil and Gas Production.
Community Insights series
This article, written by Mirte Boot and Ingrid Sundvor, summarises a new policy brief co-written by the Carbon Balance Initiative, an NGO founded by former University of Oxford researchers, and members of Oxford Net Zero.
The Smith School's Community Insights series features up-to-the-minute and incisive commentary from leading voices outside of academia, including from our Board, business fellows and partners.