Conservative MEP proposes £1.5 billion boost for North Sea oil and gas industry

31-May-2016 @ 11:45

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A change to EU law is being proposed which could boost the North Sea oil and gas industry by as much as £1.5 billion over ten years.

Conservative Energy spokesman Mr Duncan MEP wants to close a loophole in the Emissions Trading System (ETS), the EU’s flagship climate change policy, which forces oil and gas operators to buy emission permits for the electricity they generate offshore.

Mr Duncan has been appointed by the European Parliament to lead reform of the ETS and proposes the idea in his first report, which is published today.

Under current EU rules, electricity providers are not eligible for free permits which allow them to discharge greenhouse gases without penalty because they can pass on costs to customers. However, as off-shore oil and gas platforms are not connected to the electricity grid they are unable to recover costs in this way, so Mr Duncan wants to make them eligible for free allowances like other industries covered by the ETS, such as steel and cement.

The move would make oil and gas companies eligible for around £1.5 billion worth of allowances between 2020, when the law comes into force, and 2030 when it will be reviewed again. Typically electricity makes up between 30% and 40% of emissions from oil and gas platforms.

Mr Duncan said: “Right now the ETS is like a car without an engine, we need to ensure it is fit to do the job it should and drive emissions reductions in Europe. Removing this loophole could save the North Sea oil and gas industry billions of pounds of lost revenue.

"I will push as hard as I can to convince my colleagues in the European Parliament and the Council that this is a common sense idea worth supporting.”

His report also proposes a better method of distributing free CO2 emission allowances to industries at risk of relocating outside the EU due to the cost of environmental regulation.

And a further 150 million allowances, worth up to €3.75 billion, could be made available to firms trialling new techniques and processes, including carbon capture and storage technology.

Mr Duncan, Conservative MEP for Scotland, added: "Innovation is critical to the continued growth of industry and jobs in Europe, which is why I believe we need to scale up the innovation fund and make it more accessible.

"These changes, taken together, will ensure the ETS is both an ambitions and effective tool to meet our climate change obligations while promoting jobs and growth."

The full draft report can be read at:

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