Such sharp declines in fossil fuel production will not come as a surprise given the government’s policies to reduce consumption whilst encouraging investment in renewables. But it does reinforce the questions raised - particularly by sustainable investors - around the UK’s place in the world when it comes to energy production and net zero.
Successive governments (of all colours) have championed the UK punching above its weight on the transition to net zero. Boris Johnson surprised many, including those within his own party, with his commitment to the cause, and the UK still remains second only behind China for offshore wind production.
But after those years of relative consensus around energy and climate issues in the UK, Rishi Sunak shifted the government’s focus and tone on net zero in 2023. Sunak wants to reduce what he sees as the financial burden of some net zero policies on business and the public, in what is seen by many as an electoral ploy to create a clear dividing line with Labour on energy.
Labour’s approach, despite recently abandoning its pledge to spend £28bn a year on green energy, would largely represent a return to more ambitious climate policies seen under the likes of Johnson and his predecessors.
Views on the merits of the two main parties’ net zero policies will always differ, but businesses, investors, NGOs and industry groups all agree that political certainty is key for securing future sustainable investments in the UK. Just last week industry group Offshore Energies UK suggested the “warning lights are flashing” on investor confidence in what appears to be the latest in a long list of similar warnings.
Investors may view the prospect of a Labour government (and a return to the pre-Sunak consensus) as a positive shift after a political outlier. But there are likely to be some concerns around the potential for further disruption, with Starmer likely to align policies such as the UK’s Carbon Border Adjustment Mechanism with the EU where possible - in what could represent a significant shift to a number of the UK’s key climate policies.
In an election year in which Sunak will increasingly seek to highlight their differing positions on energy and climate policies, Labour may be reluctant to give too many details on its plans for government. Ultimately, sustainable investors and the other groups will have to wait until after the election for a level of certainty due to the increasingly politicised nature of the debate.
The ESG News Review is written by Stephen Kelly, senior consultant at PR agency BOLDT.