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Sixth Carbon Budget calls for £50bn annual investment to achieve UK net zero target by 2050
The Sixth Carbon Budget published by the Committee on Climate Change (CCC) on 9 December 2020 presented an ambitious and challenging energy transition programme which will impact all UK industries. The report highlights the vital role renewables, hydrogen and carbon capture and storage (CCS) will play. Meanwhile, oil and gas demand is expected to fall by up to 85% and 70% respectively by 2050.
The report suggests £50bn investment will be required annually through to 2050 to achieve the UK target of net zero carbon emissions by 2050. The CCC emphasises the need for meeting the UK’s ongoing energy needs from domestic energy production and warns of the risk that lower production costs internationally could favour imports.
The UK oil and gas chain currently has an annual turnover of over £26bn. The majority of these companies are said to be already active in renewables or other parts of the energy, and ‘have a real opportunity in terms of the new investment’.
Oil and gas industry body OGUK said the report underlines the need to deliver a homegrown transition towards net zero. The CCC underlined the importance of ‘policy’ to ensure a fair transition, noting the UK government’s planned North Sea Transition Deal that is designed to enable oil and gas workers to transition to the hydrogen and other renewable energy sectors.
The report recommends the development of a ‘blue hydrogen bridge’ where the reformation of natural gas with carbon capture and storage (CCS) is used in the short- to medium-term to establish a mass market for hydrogen – providing about 60% of hydrogen supply by 2035, falling to 32% by 2050 as green hydrogen (from electrolysers and renewable energy) capacity builds up.
Development of CCS at scale will be dependent on development of CO2 emission pathways and storage capabilities for Scotland, Wales and Northern Ireland.
The report calls for action to reduce emissions from the remaining fossil fuel supply by 75% by 2035 from 2018 levels, using mitigation actions such as fuel switching, CCS and methane reduction technologies. This is in line with industry commitments to halve emissions in the next decade and reaching 90% by 2040.
Response to the CCC report was generally favourable. ‘We recognise that the industry we see today will be different to the one we see in the future. Many oil and gas companies are already adapting and transforming and with our supply chain is actively pursuing the new energy opportunities highlighted,’ said OGUK Chief Executive Deidre Michie. ‘As we look to bring these big changes to life, securing targeted support for our domestic supply chain remains critical if it is to attract a healthy share of the £50bn investment the CCC says will be required annually by 2050.’
Colette Cohen OBE, OGTC Chief Executive, said the report ‘underlines the need for urgent investment to build an affordable net zero energy future for the UK’. She said the CCC report reflected the Progressive scenario from the OGTC’s recent Reimagining a net zero North Sea report and is consistent with the growth in wind (energy) required by the CCC to meet the Sixth Carbon Budget.
‘Publication of the UK CCC’s Sixth Carbon Budget is a very positive step on our journey to a net zero future,’ commented Sir Ian Wood KT GBE, Chair of Opportunity North East, ONE. ‘A fundamental shift in how we produce and use energy is essential to deliver this plan and the North East of Scotland, with its incredible natural resources and world-class energy supply chain, is uniquely placed to accelerate the transition.’
The report was published in the wake of UK Prime Minister Boris Johnson’s 10-point plan for a green industrial revolution, announced in November, followed a week later by the national infrastructure strategy and much-anticipated announcement of a national infrastructure bank. David Reay, Professor of Carbon Management at the University of Edinburgh said: ‘Credit where credit is due, this is evidence-based policy-making and the rest of the world will take note. Now comes the hard part: realising these commitments in the face of new trade deals – post-Brexit, COVID recovery and yellow vests.’ But he warned: ‘There are gaps in policy, skills and funding for net zero infrastructure, and in the emissions reductions required to keep us within our already agreed carbon budget, never mind this more stretching commitment.’