5 reasons why going ahead with Rosebank and Jackdaw is bad for the economy

The Government allowing the development* of Rosebank and Jackdaw would lead to confusion about the direction of travel and undermine investment into the clean transition. This might be justified were there to be clear economic benefits but, in fact, such investment risks generating low returns and would be against the UK’s strategic economic self-interests, causing the country to:

• Risk putting money into stranded assets which will require taxpayers to bail out decommissioning costs
  • The breakeven price for the Jackdaw and Rosebank fields is below the price for oil and gas prevailing today, but higher than many fields around the world (for context, see this analysis). With oil demand likely to peak and fall over the coming decade as cars and other technologies become powered by electricity, these fields may be rendered uneconomic and left unused soon into their lifetime. 
  • Further global tensions in oil producing regions such as Russia, the Middle East or elsewhere may help sustain higher oil and gas prices, and prolong the viability of the fields, but this risk simply increases the economic rationale for investment in cheaper, domestically sourced renewable energy.

• Lock in further reliance on volatile oil and gas markets while losing out on productivity and efficiency gains of domestic clean energy
  • Evidence is clear that production from Jackdaw and Rosebank would make no significant difference to the UK’s energy security or ability to influence international market prices for oil and gas. 
  • Instead, by undermining investment in the transition away from fossil fuels, it would leave the UK vulnerable to future potential price shocks. The energy crisis triggered by Russia’s invasion of Ukraine helped to drive inflation and required the Conservative Government to spend more than £58 billion in 2022–23 to protect households and businesses against high prices, which contributed to huge profits for energy companies and foreign gas suppliers.
  • The oil and gas economy involves ongoing imports from volatile international markets and costly labour resources to operate associated infrastructure, whereas the clean economy is built on capital- and knowledge-intensive technologies like wind, solar PV and batteries which operate at close to zero marginal costs, once the kit is installed. This means lower cost electricity and electric vehicles that are cheaper to run and maintain than internal combustion engines.

• Miss the growth opportunity of the 21^st century
  • Net zero is a growth opportunity for the UK because domestic firms and innovators are able to create competitive clean products and services for growing global markets. According to the International Energy Agency, the global market for key clean energy technologies is set to triple to more than $2 trillion by 2035 as energy transitions advance.
  • Realising this opportunity requires investment now in the necessary capabilities and supply chains within an overall rise in annual public and private investment of no less than 3% of GDP each year, with around 1% coming from public investment, to drive sustainable growth and tackle environmental degradation.
  • The UK has existing comparative advantages over other countries in services like green finance and in many clean technologies like offshore wind, carbon capture and storage and tidal stream energy. Given the location of such strengths around the country, related investments also have the potential to boost the performance of some of the UK’s less productive regions. 
  • Failing to drive that investment would mean a loss of competitiveness in global markets for the technologies and services of the future, leading to continued stagnation in productivity and living standards.

• Fail to capture broader benefits such as cleaner air
  • A slow transition would also mean the UK would be delayed in capturing the broader benefits – such as cleaner air, improved access to green space and reduced traffic congestion – of adopting clean energy and infrastructure.
  • These problems currently threaten people’s wellbeing and limit productivity, with air pollution costing the NHS and UK businesses more than £20 billion each year.

• Lose its ability to convince other countries to act
  • Allowing the development of these fields would send a dangerous signal to other fossil fuel producing countries that the UK Government supports a ‘business as usual’ approach to the oil and gas industry, undermining efforts to limit global warming to 1.5°C.
  • This would have catastrophic impacts on the UK and populations around the world. According to a 2022 LSE study, without strong global mitigation action, the total cost of climate change damages to the UK could increase from 1.1% of GDP in 2020 to 3.3% by 2050 and 7.4% by 2100.

Esin Serin, Policy Fellow at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science, said:

“Allowing the development of Rosebank and Jackdaw would be clearly against the interests of the UK public and the economy, whatever a narrow assessment of the environmental impacts may suggest. The signal such a decision would send to investors in the UK and to other fossil fuel producing countries would be disastrous. 

“Continuing to support investment in oil and gas is not a credible clean growth strategy and would fail to convince investors to put their money in the UK when it comes to developing clean technologies and capabilities of the future. The result would be a loss of competitiveness in global markets and forgone growth opportunities. Prioritising clean growth is the common sense approach.” 

ENDS

*The Government has consulted on revised environmental guidance to take into account emissions from burning extracted oil and gas, and is working towards publishing the finalised guidance “as soon as possible”. If developers of Rosebank and Jackdaw wish to proceed with these projects, they will need to reapply for consent once this revised regime is in place. On 29 January, the Court of Session in Edinburgh ruled that the previous consents granted to the fields were unlawful, as they did not account for the emissions from burning the fuel produced.