World

Does Nicola Sturgeon care more about oil revenue or climate change?

12 September 2021

6:45 AM

12 September 2021

6:45 AM

‘Now, as I’ve hopefully made clear throughout all of my remarks, the North Sea will continue to produce oil for decades to come. It still contains up to 20 billion barrels of recoverable reserves. Our primary aim – and I want to underline and emphasis this – our primary aim is to maximise economic recovery of those reserves.’

The words are from a speech made in June 2017, a few months after the Paris Agreement that aimed to limit climate change came into effect. A speech by a pro-oil Conservative, or perhaps the head of an industry group working on behalf of the oil sector? No. They are, in fact, the words of First Minister Nicola Sturgeon speaking at the Oil and Gas UK Conference that year.

Skip forward to a few weeks ago and we find a far less confident First Minister struggling to respond to climate activists who challenged her to ‘oppose Cambo’, a reference to the Cambo oilfield development off Shetland. A decision on whether Cambo, which was granted an exploration licence in 2001, becomes a commercial field (it is thought to contain 800 million barrels of oil) currently sits with UK regulators and is proving controversial in light of the climate challenge.

Having recently brought two Scottish Green party ministers into her government, with the COP26 climate conference taking place in Glasgow later this year – and with yet another economic prospectus for independence said to be in the works – Sturgeon’s position on oil and gas extraction will increasingly be in the spotlight. That begs the question as to how important oil and gas is to the independence movement today: is it an asset or a liability?

In one sense, the economic assessment has become much simpler. Oil and gas tax revenues are a fraction of what they once were. The latest official Government Expenditure and Revenue Scotland (Gers) numbers, which monitor Scotland’s share of offshore revenues on both a population split and geographic split basis, shows this clearly (see graph below). The days of multi-billion-pound annual oil tax revenues pouring into government coffers are over.


Screen_Shot_2021-09-09_at_12.45.46.pngSource: Government Expenditure and Revenue Scotland 2020-21

The Salmond-Sturgeon 2014 independence prospectus was sold on the basis that Scotland’s structural fiscal deficit would be mitigated by ongoing multi-billion-pound annual tax receipts from the North Sea. The reality is that in 2016, the year Scotland would have seceded following a ‘Yes’ vote, Scotland’s geographical share of oil revenues went negative for the first time. If Scotland had broken away it would have been the biggest mis-selling scandal in history.

The danger of relying on North Sea revenues as a key pillar of the economic case for separation was recognised in 2018 when the SNP updated its independence pitch. The party’s Sustainable Growth Commission report recommended oil revenues be seen as a ‘windfall fiscal bonus’ and not relied upon for fiscal management.

In disregarding oil revenues, therefore, Sturgeon is on safe ground – indeed, the more interesting and contentious discussion is on how much tax relief-based costs associated with decommissioning a future independent Scotland would take on as part of the divorce settlement. That means Sturgeon’s reluctance to come out against further oil and gas extraction is likely more to do with jobs and unease at being seen as the enemy of an industry she spent years defending.

The oil and gas sector contributed £16.2 billion in gross value added to Scottish GDP in 2019 (around ten per cent of Scotland’s GDP), supporting an estimated 105,000 jobs. That’s a big chunk of economic activity and a lot of voters to potentially disgruntle.

Thatcher’s radicalism for rapidly dismantling declining industries might be shared by the Scottish Greens, but Sturgeon’s instincts are far more conservative.

After being confronted by the Cambo protestors, Sturgeon, in a feeble attempt to neutralise the fallout and re-bolster her green credentials without actually changing her position, wrote a letter to Boris Johnson. She asked for Cambo and other licences to be ‘reassessed in light of the severity of the climate emergency we now face, and against a robust Compatibility Checkpoint that is fully aligned with our climate change targets and obligations’.

Job done. Let’s get back to spuriously presenting Scotland as leading the world on climate change on the basis of emissions targets that any legislature anywhere could make and that, as with hospital waiting time targets, can easily be broken at no cost.

Sturgeon’s positioning on oil and gas extraction is to sit on fence as long as possible. Whether the climate lobby or the oil and gas lobby let her is another matter.
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