COP26 Update: North Sea Transition Deal, Regulator Decisions and Floating Wind Opportunities

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As COP26 approaches, Brevia will be tracking the latest milestones in the UK’s preparations for the upcoming climate conference. Three developments this week:  North Sea Transition Deal Published, Financial Regulators to consider Net Zero in decisions, and Crown Estate developments.

1. NORTH SEA TRANSITION DEAL PUBLISHED

This Wednesday 24 March, the Government published its landmark North Sea Transition Deal for the oil and gas sector. The deal delivers on the Government’s 2019 manifesto commitment and constitutes the first deal of its kind by a G7 country – a welcome achievement for the UK as host of both COP26 and the G7 Summit this year.

The policy paper sets out the steps and support needed to deliver the required decarbonisation in the North Sea basin. Key commitments include a 50 per cent cut to emissions by 2030, with early targets of reducing emissions by 10 per cent by 2025, and 25 per cent by 2027. The deal will also bring forward £16bn joint government and sector investment by 2030. This funding includes up to £3bn to replace fossil fuel-based power supplies on oil and gas platforms with renewable energy, as well as £3bn for Carbon Capture Usage and Storage (CCUS), and up to £10bn for low-carbon hydrogen production. [1]

Whilst the targets and commitments outlined have mostly been welcomed by green businesses, questions have been raised over the Government’s decision to continue to grant oil and gas exploration licenses, particularly as Denmark recently moved to end new licenses for drilling in the North Sea.[2] In particular, groups expressed disappointment in the Government for failing to take advantage of the opportunity to show leadership here,  with Greenpeace branding the deal a  ‘a colossal failure in climate leadership in the year of Cop26’.[3]

2. FINANCIAL REGULATORS TO CONSIDER NET ZERO IN DECISIONS

The Chancellor has written to the Financial Conduct Authority and the Prudential Regulation Committee instructing them to take the UK’s net zero target into account in all their decisions. This means that the financial regulators will now need to consider climate-related risks and impacts in their planning.[4]

The move follows a series of green finance announcements this year, including the Chancellor’s decision to update the remits of both the Bank of England’s Monetary Policy Committee and Financial Policy Committee. The latest announcement means that all of the UK’s principal financial bodies are now required to ensure their activities are aligned with the UK’s net zero target.[5]

The announcement builds upon the Government’s ambition to be a leader in green finance ahead of the COP26 conference. Announcing the news in a statement, the Treasury said that the decision ‘raises global ambition ahead of COP26 in November where the UK is aiming to ensure every financial decision takes climate change into account.’[6]

3. CROWN ESTATE TO OPEN FLOATING WIND LEASING OPPORTUNITY

The Crown Estate announced that it will be launching a new leasing opportunity for floating offshore wind in the Celtic Sea. The new leasing opportunity will be aimed at  projects with a total capacity of roughly 300MW, a threefold increase on the previous floating wind rights awarded in the UK. [7]

The announcement brings the UK one step closer to meeting the Government’s target of delivering 1GW floating wind by 2030, as well as the Prime Minister’s ambition for the UK to be the ‘Saudi Arabia’ of wind power. [8]

The decision follows the consultation held in December 2020 which sought views on how to best expand the UK’s floating wind capabilities.  Further details on the lease design and process will be published in the coming months.

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Notes

[1] Department for Business, Energy and Industrial Strategy, North Sea Transition Deal, 24 March 2021, link

[2] Business Green, ‘Denial and delusion: Green groups slam government refusal to rule out new North Sea oil and gas exploration’, 24 March 2021, link

[3] The Guardian, ‘UK government to allow new North Sea oil and gas exploration’,  24 March 2021, link

[4] HM Treasury, Correspondence: Recommendations for the Financial Conduct Authority, 24 March 2021, link

[5] Business Green, ‘Key UK financial regulators mandated to consider climate issues’, 25 March 2021, link

[6] HM Treasury, ‘Climate considerations now fully embedded across UK principal financial regulators’, 24 March 2021, link

[7] The Crown Estate, ‘The Crown Estate to create new floating wind leasing opportunity in the Celtic Sea’, 24 March 2021, link

[8] New Civil Engineer, ‘World’s largest floating offshore windfarms to be built off Welsh coast’, 25 March 2021, link

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