Can we use oil and gas in a wellbeing economy?

This is from a newsletter from Gordon MacIntyre-Kemp, called Reinventing Scotland. It explores the wellbeing economy. Sign up here to receive it every Tuesday at 7pm. 

FOR years Business for Scotland's position on oil and gas taxation, and development, has been at odds with the SNP administration. Yesterday however, the gap closed significantly as Humza Yousaf set out plans to use windfall taxes on oil and gas companies to fund a transition to renewable energy for the north east and Scotland as a whole.

In January last year we stated: Scotland needs a proper and significant tax on the profits of energy companies and we must use the revenue to ease the cost of living crisis and transition to a green, wellbeing economy.

And that: Scotland’s oil wealth will not last forever and we must make the transition to a renewable energy system for the sake of the planet and future generations.

To do this, it is critical that we harness the remaining resources of the North Sea, instead of having them extracted to line the pockets of energy giants.

The path to Scotland as a renewables powerhouse lies only through independence – we must grasp it with both hands before it is gone forever.

The reality of North Sea oil and the environment

It seemed pretty simple to us, yet the SNP under Nicola Sturgeon didn't back that policy openly and was also set against any new oil and gas licences. An approach that seemed muddled, meant that the SNP would perform badly in future north-east elections and would have ZERO impact on the environment.

Let's be clear, if Scotland stopped producing oil tomorrow then there would be no reduction in carbon emissions. Other oil-producing nations would rub their hands with glee watching the oil price rise and then steadily increase their own production to fill the void.

All that would happen is that Scotland's economy would fall into a recession, and Aberdeen would become a ghost town. Sure, Aberdeen had some boom years but regions around the world with miniscule oil deposits kept more of their own wealth than Scotland’s north east.

The SNP needed to be more pragmatic

The best way to create a sustainable economy is to ensure affordable energy bills for households and businesses. To create a just transition that doesn't devastate the north east, whilst also protecting the environment, we must bring windfall taxation to bear on oil and gas companies who have been making record profits during the cost of living crisis and ring fence that revenue for investment in Scotland’s renewable energy potential.

The skills required to make Aberdeen and the north east a world centre of renewable energy generation are already there. All it needs is the right level of investment, which it will not receive under any Westminster government.

So why the change in direction?

Many senior SNP figures in the north east were rebellious during Sturgeon’s latter time as FM, and some told me they blamed the influence of the Greens. But I don't think that is the case. Many senior figures in the Greens I spoke to were (at least privately) highly pragmatic on the issue of North Sea oil. The idea of taxing oil fairly whilst massively increasing the production of green energy from the proceeds would lower the price of energy, end energy poverty and price oil out of the energy markets.

How about raising the windfall tax?

Before Keir Starmer's U-turn on £28bn of investment in renewable energy, a huge share of which would have come to Scotland due to our renewable energy potential, increasing the windfall tax on oil and gas companies by the 3% he still proposes had some merit.

Much of that investment would have reached the north east, safeguarding jobs and indeed benefited the oil and gas sector as they transitioned to renewables.

Wellbeing economics is about values not dogma and Westminster dirty tricks

Protecting Scotland’s wellbeing means protecting jobs and communities whilst balancing that with the needs of the environment. That involves fair taxes on polluting and profiteering companies and government led investment in new green energy sources.

Scotland got lucky twice with natural resources, it was the Labour government in the 1970s that decided against creating an oil fund for Scotland and now Labour again look to Scotland as a cash cow for England's failing economy. Let's not make the same mistake twice.

The details of Yousaf and Flynn’s plan will have to be thrashed out more precisely but it's a big step in the right direction. Scotland can become a renewable energy powerhouse but only if we manage our own affairs.