Scotland's Fossil Fuel Sector Hangs in the Balance as Ministers Consider Calls to Intervene


A year on from the Scottish Government’s declaration of a climate emergency, the country’s fossil fuel industry is about to enter a critical period as ministers weigh up key decisions on how to achieve ambitious climate targets in the face of the coronavirus pandemic.

The vast industrial complex around the port and town of Grangemouth – once the cradle of Scotland’s industrial revolution – remains the beating heart of Scotland’s fossil fuel industry.

The sprawling petrochemical production facility is thought to generate between 3 – 4% of Scotland’s GDP and four of its plants are amongst Scotland’s top ten polluters. Its refinery is the only site north of the border where crude oil from the North Sea can be converted into petrol and plastics, before being sent to market.

These factors will surely be at the forefront of the minds of Scottish Government ministers, as they consider a request by the site’s operators, Petroineos, for loans worth up to £500m to plug the gap created by the collapse in fuel demand caused by government lockdowns.

Petroineos is a joint venture between chemicals giant INEOS and the Chinese state-backed oil and gas company PetroChina. INEOS owner Jim Ratcliffe, whose £18bn personal fortune ranks him third wealthiest individual in the UK according to the Sunday Times Rich List, drew criticism from MPs last year for his move to Monaco, known for its low taxes.

Intense political volatility has surrounded Grangemouth since a totemic series of industrial relations disputes in 2013. Since then, both the UK and Scottish Governments have supported the facility financially, despite a prolonged court battle with the latter over fracking in the Forth Valley.

Today, the Scottish political scene is nervously eyeing how to achieve a “green recovery” from the COVID-19 crisis, while also considering the future of this vital piece of Scotland’s economic infrastructure, a status that would only be enhanced in the event of Scottish independence.

Business as usual?

The call for public support for Grangemouth follows similar messages from companies operating in the seas off Scotland’s east coast.

Trade body Oil and Gas UK (OGUK) warned of 30,000 job losses in the offshore sector within the next 12 – 18 months. With the possibility of activity levels falling by 50% this year compared to 2019, it has highlighted that North Sea supply chains are particularly vulnerable to collapse.

Dave Moxham, Deputy General Secretary of the Scottish Trades Union Congress (STUC) warns that unless jobs and skills are saved, a collapse in the workforce could endanger Scotland’s capacity to transition away from fossil fuels.

The coronavirus epidemic has exposed large parts of industry, including in the North Sea, as slow to protect workers and quick to throw them on the scrapheap.  

While the job retention scheme provides short-term relief for many, in the longer-term we risk losing thousands of highly productive workers whose skills are crucial to transitioning to a low-carbon economy,” he said.

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OGUK has proposed a three-stage response to the crisis: immediate support, a stimulated recovery, and an accelerated transition to net-zero emissions.

But environmentalists have questioned whether the current economic structures at work in the North Sea are adequate to deliver a fair and ambitious net-zero agenda.

Ryan Morrison, Friends of the Earth Scotland’s Just Transition Campaigner, said: “Any attempt to simply jump straight back into a business as usual approach to the offshore industry is locking in another crisis through climate breakdown in the near future. This is the critical decade for climate action.

Another four or five years of propping up oil and gas shareholder profits will drive us further into climate breakdown while failing to put in place the long term support needed for those working in the industry in Scotland and the rest of the UK,” he warned.

Morrison is also concerned about the prominence of as yet economically unviable technologies such as Carbon Capture and Storage in OGUK’s proposed accelerated push for net-zero.

There should not be public investment in technologies such as Carbon Capture or fossil hydrogen that fuel the fantasy that we can keep on using oil and gas indefinitely.

Aside from that, reliance on technological solutions which are not even currently deployable is a precarious ground for an already unstable industry,” he added.

Oil and Gas UK did not respond to a request for comment.

Scotland in transition

Anticipating the publication of its Climate Change Plan, now postponed till the end of this year, the Scottish Government offered an upbeat response to the recommendations recently made by the UK’s Committee on Climate Change (CCC).

Last week, Scotland’s Environment Secretary Roseanna Cunningham told the BBC: “While we remain in lockdown, in anticipation of a ‘new normal’, we have a chance to re-imagine the Scotland around us, and to begin building a greener, fairer and more equal society and economy.”

The plan is set to outline the steps needed to achieve a 75% reduction in emissions by 2030.

This will involve tackling the contribution of economic sectors like housing and transport that have been flagged as particularly challenging to decarbonise in previous CCC reports.

Thus far, responses to the COVID-19 pandemic have largely taken place on a sector by sector basis, such as through the Scottish Government’s newly formed Strategic Leadership Group on Oil and Gas and Energy Transition.

Professor Dave Reay, Chair in Carbon Management and Education at the University of Edinburgh, emphasised the need for a joined-up approach to recovery.

Every sector will of course want to maximise its own support and protections, but without design and implementation that addresses climate resilience and avoids high carbon ‘lock in’, all sectors will suffer,” he warned.

Reay told DeSmog he broadly supported comments made last month by Professor Raphael Heffron, Chair of Global Energy Law and Sustainability at the University of Dundee, identifying the Scottish Government’s Just Transition Commission, tasked with mapping out a socially equitable shift away from carbon, as a key player in any green recovery.

In Reay’s view, the commission’s remit “could grow arms and legs over the coming months”, potentially driving a recovery focused on expansion of renewables, hydrogen fuel and energy efficiency.

Green jobs, skills and education remain a crucial element in delivering on the 2030 target, and against the crushing economic forces of Covid and climate change they represent a powerful means to push back,” he adds.

We need to learn from past mistakes’

There is growing political pressure on the SNP administration to use public investment and ownership to drive a green recovery in a manner that addresses underlying inequality.

Significant Government intervention is needed but it must be conditional on safeguarding jobs, taking a stake in companies, and rebuilding an industry fit for the future. Rather than simply bailing out bosses, we must bail out workers, take back control of our energy system and repurpose it for a low-carbon future,” says the STUC’s Dave Moxham.

Social democratic think tank Common Weal recently established a Green New Deal Group within the SNP to push for transformative public sector driven policies to accelerate the move to net-zero.

The group is supported by numerous SNP politicians in Westminster and Holyrood. One of their number, former Justice Secretary and current MP for East Lothian Kenny MacAskill, said: “There has to be a better way, as after coronavirus has passed the climate change crisis remains. The public sector has always been critical and recent events have confirmed that. Economic policy should acknowledge that.”

Referencing the steep decline of Scotland’s status as a manufacturing powerhouse for over a century following the industrial revolution, MacAskill added: “We need to learn from past mistakes and ensure it is seamless, not catastrophic, for the workforce. It’s about political direction to ensure a transition is delivered from fossil fuels to renewables. Scotland is centrally placed to deliver that.”

Photo credit: Scotland By Camera/Flickr/CC BYND 2.0

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