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Government Cooling On Green Pledges Could Damage Business And Investment

Concern has emerged that the government's latest policies and rhetoric on energy could damage investment. (Alamy)

4 min read

MPs and business leaders have warned that government drifting away from environmental commitments could compromise business and investment in the UK.

On Monday, the government announced it would be granting over 100 new drilling licenses to explore for oil in the North Sea in order to ensure the UK is "maxing out" its domestic supply of oil, despite warnings about the impact of fossil fuels on climate change.  

Prime Minister Rishi Sunak has argued the intervention will "strengthen UK energy security, boost jobs and grow the economy" and that the government must find the "right balance" to transition to net zero.

However, the move has been widely criticised – with business leaders, moderate Tory MPs, Labour, and environmental campaigners warning against the policy.

There are also warnings that extracting new oil from the North Sea would do little to protect UK consumers from another energy crisis, as prices are set by international markets and the overwhelming majority of oil extracted in the North Sea is sold abroad. 

Angus MacNeil, an independent MP who chairs the energy security and net zero (ESNZ) select committee, told PoliticsHome the government's "shortsighted" policies and rhetoric risk jeopardising investment in UK energy due and undermining commitments to tackle climate change.

"When George Osborne scrapped zero carbon homes that became a problem for the business because they'd already arranged to do that," said MacNeil.

"[The North Sea oil policy] also sends signals for the future that whenever they've got an announcement, don't take it too seriously because it probably roll back and then nine months later – so it looks like a government that's vacillating."

Adam Berman, deputy director at Energy UK, said the government's recent actions represented the UK "standing still" on the green agenda which would be detrimental to business. 

"Clearly, industry is concerned about the possibility of watering down kind of key policies that are going to enable us to reach net zero," said Berman.

"At the same time, from our perspective, what's been happening over the last few months is not necessarily a watering down. But more, just to kind of more that the government is standing still when it comes to this agenda - and that's not an action that is without consequences.

"Standing still doesn't mean a continuation of the status quo, it doesn't mean we can continue to decarbonise or at the pace we have done, it doesn't mean we can continue to build out renewables at the pace we have done.

"It means that we're failing to keep up with other countries like the US through its Inflation Reduction Act, or policies like that, which are increasingly pulling investment away from the UK."

He added: "In the light of what's going on internationally, it's incumbent on the UK to actually increase the ambition of its policies."

Mark Sommerfeld, deputy director of policy at the Association for Renewable Energy and Clean Technology (REA) , which represents around 500 renewable and clean industry organisations, said the government's latest rhetoric on net zero and green policies "sends a very confusing signal to the market".

"We've seen on the international markets places like the US deliver the Inflation Reduction Act, and we've seen the EU deliver their Green Deal package, which is focused on legislation," said Sommerfeld.

"Those places are sending very strong messages to businesses and investors that they are going full throttle on decarbonising and decarbonise business, and we'll see investment in renewables investments in low carbon technologies, investments in carbon capture, use and storage, those kinds of areas.

"So by comparison, in the UK, we've got some strong ambitions but no real policy to see it delivered. And as a result, the attractiveness of investment in the UK is has now diminished significantly.

"And [Monday's] announcements have not helped that at all,  because rather than pushing on new investment into renewables, new investment into our grid, our grid systems, they're saying: 'Oh, we're going to focus on fossil fuel extraction'."

He added: "We're already starting to see commitments to new fossil fuel extraction is being seen on the global stage, people are already starting to question is the UK serious about its previous commitments.

"What we said at COP26, in Glasgow, and existing carbon budgets and Net Zero commitments - the globe is watching that. And they are saying: 'what does this actually mean for the UK adhering to their current positions?'"

The department for energy security and net zero has been approached for comment. 

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