The Press and Journal (Inverness, Highlands, and Islands)
A windfall tax likely to damage just transition
The north-east earned its reputation as the energy capital of Europe for its significant involvement in the oil and gas industry over the past 30 years.
Despite challenges, the region remains buoyant, resilient and innovative as it pivots towards a new goal of becoming the netzero capital of Europe.
Businesses, governments and individuals are increasingly focused on balancing Scotland’s and the UK’s energy market, security and resilience with the delivery of a “just transition” and decarbonisation.
Getting Scotland and the UK’s energy transition right has the potential to unlock transformational economic growth.”
The events of COP26 in Glasgow last year almost seem a world away now, following the emergence of the Omicron variant of Covid-19, the Russian invasion of Ukraine and the unfolding of new post-pandemic economic challenges, such as rampant inflation.
With sharp rises in petrol and diesel costs driving up inflation to the 7% mark in recent weeks, the fastest rise in 30 years, businesses and consumers are feeling the impact on their finances.
The Scottish Chambers of Commerce quarterly business survey for the first three months of this year revealed record high levels of concern among businesses
over inflationary cost pressures.
It casts a shadow over a relatively steady recovery from the worst effects of the pandemic.
Surging energy costs are continuing to put pressure on businesses, while the increased price cap will further erode discretionary spending by households as disposable income levels fall.
The impact of the UK Government’s failure to introduce an energy price cap for small and medium-sized enterprises has also resulted in businesses having to take tough decisions and, increasingly, pass costs on to consumers.
To help tackle the rising cost of living, prospects of a windfall tax on the profits of energy companies have been widely touted.
But this would be a blunt instrument more likely to harm investment in delivering a just transition, and would drive up energy prices to even higher rates for consumers.
Instead, the UK Government should look to direct existing revenues from these businesses into support for renewable and low-carbon technologies, and deliver incentives which support reinvestment in net zero, providing a long-term
and more sustainable solution. It has outlined plans for better energy security amid ongoing volatility in international commodity markets, with the publication of a new strategy.
New commitments to supercharge clean energy and accelerate deployment will be seen, with the ambition for 95% of the UK’s electricity to be derived from lowcarbon sources by 2030.
The new strategy will also support the quicker expansion of nuclear, wind, solar, hydrogen, oil and gas energy sources – reducing the UK’s dependence on imports.
This in turn could
create thousands more jobs in the energy sector over the next decade.
Critically, the UK Energy Security Strategy accepts as part of a just transition to net zero, oil and gas will remain integral to satisfying domestic energy demand for decades to come.
This will, of course, require exploration, development and production from new fields, which will be critical for energy security – sustaining jobs and our economy through the transition and unlocking investment in low carbon technologies and renewables.
While the Scottish
Government has indicated it will not support the development of new nuclear sites in Scotland, many businesses are eagerly awaiting publication of the Holyrood administration’s new Energy Strategy and Just Transition Plan in the autumn.
The success of this will rest on the delivery of strong local partnerships between business and government to develop investment opportunities.
Moray and the northeast are poised to benefit from the £500 million Just Transition Fund.
It is essential businesses are supported to engage with delivery on the ground, accelerating the journey to net-zero, developing technology at scale and creating jobs.
Recovering from the pandemic creates a real opportunity to accelerate our net-zero ambitions.
But we need to do so in a way that protects the many communities involved in carbon intensive sectors
of our economy and helps businesses adjust as they navigate complex economic challenges.
Getting Scotland and the UK’s energy transition right has the potential to unlock transformational economic growth, not only in the north-east but in every part of the country, while also delivering on net-zero ambitions, and providing energy security and supply at increasingly affordable prices.