A recent report from the Institute for Economic Affairs (IEA) has intensified debate surrounding the UK’s energy policy, claiming that efforts to halt North Sea oil and gas production may inadvertently escalate global carbon emissions.
The think tank’s analysis suggests that the government’s net zero ambitions, coupled with the existing windfall tax on North Sea producers, are likely to result in increased reliance on energy imports.
According to the Climate Change Committee (CCC), sourcing energy from overseas, a process termed carbon offshoring, can generate approximately 50 per cent more carbon emissions compared to domestic extraction.
Kathryn Porter, author of the IEA report and founder of energy consultancy Watt-Logic, warned that a surge in oil and gas imports would lead to a net increase in global carbon output. Porter stated: “Unless we change course rapidly, Britain will be increasingly reliant on dirtier, more expensive imports – and less secure on cold winter days when we need energy most.”
The IEA report also highlights concerns regarding the Energy Profits Levy, a tax initially introduced by the Conservative government in May 2022. This levy, which currently stands at a headline rate of 78 per cent on the profits of oil and gas companies, is cited as a key factor in the observed decline of UK production. Critics argue that the tax disincentivises investment in the North Sea, pushing companies to scale back operations and seek opportunities elsewhere.
The impact of current policies is already evident, with several major energy firms announcing withdrawals from the UK Continental Shelf. American oil company Apache has indicated plans to cease all North Sea production by December 2029, attributing the decision to the “onerous financial impact” of the Energy Profits Levy and new emissions control regulations.
Similarly, American energy giant Chevron is in the process of divesting its remaining North Sea assets and is expected to close its Aberdeen office.
Such exits contribute to a projected significant reduction in the sector’s workforce. Estimates from Robert Gordon University suggest the North Sea oil and gas workforce could fall from 115,000 in 2024 to between 57,000 and 71,000 by the early 2030s.
Concerns about energy security have also been raised, particularly following warnings from the National Energy System Operator (Neso). Neso has forecast that gas availability in the UK could be 78 per cent lower by 2035 compared to 2025, a dramatic fall that would leave the nation heavily dependent on imports from countries such as Norway, the United States, and Qatar. This potential shortfall intensifies scrutiny of the Labour government’s broader net zero strategy, which aims for Britain’s electricity grid to achieve 95 per cent clean power by 2030.
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A spokesperson for the Department for Energy Security and Net Zero countered these arguments, stating:
“Issuing new licences to explore new fields will not take a penny off bills, cannot make us energy secure, and will only accelerate the worsening climate crisis.”
The spokesperson added that the government is committed to providing long-term certainty for investors and aims to replace the Energy Profits Levy when it concludes by 2030, or sooner if market conditions trigger its early cessation. The goal, they asserted, is to protect existing jobs while fostering over 40,000 new clean energy roles in Scotland by the end of the decade.
