Purpose on Payday
SEC Newgate’s view
This month, we got a better sense of the ambition and focus of this year’s COP28 Conference in Dubai. Speaking at the World Government Summit in Dubai, the COP28 President, Sultan al-Jaber, said: "I will lay out a roadmap for COP28 that is inclusive, results-oriented and far from business as usual." He also acknowledged, “We already know that we are way off track. The world is playing catch-up when it comes to holding global temperatures down to 1.5 degrees and the hard reality is that global emissions must fall 43% by 2030. We need a major course correction.”
With the last COP not delivering much in terms of carbon emission cuts, the need for this year’s conference to make progress is significant. It will also feature the conclusion of the first UNFCC Global Stocktake of the Paris Agreement – a worldwide audit on the progress made in delivering climate pledges and targets agreed to reduce global warming. And with it being hosted by a petrostate and its president being the head of the UAE’s state-owned oil company, there is huge scepticism about how far COP28 will move the dial on climate change action. To read more about our current take on COP28 and the key events in the run up to the Conference, read our ‘Road to COP28’ brochure.
In recent weeks, the role of oil has once again been a hot topic, with the major oil companies reporting record breaking profits. Both Shell and BP announced 2022 earnings that were double that of 2021. This was of course explained by energy prices soaring following the start of the war in Ukraine, but that offered scant comfort to people and businesses that are struggling with energy bills. BP also scaled back plans to reduce oil and gas output in order to meet energy demand, leaving the green lobby in dismay.
Meanwhile, directors of Shell are being personally sued over their “flawed” transition strategy, in the first ever lawsuit against corporate directors for failing to adequately put the company on the path to net zero. The claimants, ClientEarth, say they have the backing of institutional investors with over 12 million shares in the company.
The IEA has also criticised the energy industry for not doing enough to tackle the potent warming gas, methane. In its latest Global Methane Tracker, the IEA reported that energy accounted for around 40% of total methane emissions related to human activity. It took aim at the industry’s huge profits, saying the oil and gas sector could slash emissions of methane using only a fraction of its bumper income from the energy crisis.
The pressure on oil and gas giants will understandably not let up, and clearly moving to cleaner energy will require more than investment from them. This month a dedicated UK Department for Energy Security and Net Zero was established to provide stronger focus on the UK’s energy security and transition to net-zero. The department has been tasked with establishing a long-term plan to secure energy supply and bring down bills. It will also hopefully provide some much-needed direction for investment into renewable energy.
Certainly, with the effects of the energy crisis rumbling on and COP28 being hosted by a petrostate, there will be intense focus on how far renewables will be developed this year and what commitments are made for future projects.
The road ahead
By Imogen Shaw
Newly appointed Secretary of State for Energy Security and Net Zero Grant Shapps will face his first Departmental Questions since the Prime Minister’s recent reshuffle and machinery of government changes.
We can expect questions from MPs about the priorities and focus of the newly slimmed down department responsible for energy and decarbonisation. However, it is likely that Shapps will also have to defend the Chancellor’s position that increases in energy bills support from the government will be forthcoming from April.
Earlier this month, Chancellor Jeremy Hunt announced that households are unlikely to get extra support with energy bills from April, though energy bills for a typical household are set to rise from £2,500 to £3,000 a year and the £400 discount will also end.
MoneySavingExpert founder Martin Lewis has written to the Chancellor, warning him that an increase in the price cap would mean another 1.7 million people entering fuel poverty, raising the total to 8.4 million. He urged the Chancellor to “urgently consider” postponing the planned 20% rise in the Energy Price Guarantee. His call was backed by organisations and campaigns including Citizens Advice, National Energy Action, and StepChange. Energy UK, the trade association for the energy industry, has also voiced its support for Lewis.
The campaign has the potential to cause further difficulties for the government as it looks to demonstrate it can tackle the cost of living crisis – while avoiding what the Chancellor has described as “unsustainable” spending commitments.