Environment Report 2017

3.7 The Role of Oil and Gas in Meeting Future Emissions Targets Climate change is a global challenge that requires a collective response with major shifts in energy efficiencies and the fuel mix to deliver a lower-carbon future. Under the Climate Change Act (2008), the UK has set ambitious targets to reduce emissions by 80 per cent of 1990 levels by 2050 to combat the risks of climate change. The ratification of the Paris Agreement in 2016 by the UK Government builds on these domestic targets, which are outlined in legislated Carbon Budgets. The degree towhich oil and gas ismaintained as a critical energy source over the coming decades will be determined by how far GHG emissions resulting from exploration, production and conversion (use) of hydrocarbon products can be reduced, captured and stored. There must remain a balance between meeting GHG emission reduction targets with a measured, cost-effective approach and delivering an affordable, secure domestic supply of energy required for economic growth. The UK offshore oil and gas sector is committed to playing its part in building a sustainable industry that is progressively lowering its emission intensity. UK upstream GHG emissions peaked in 1996 at 28.3 million tonnes CO 2 e and have declined steadily since 2006. This is due to the fall in oil and gas output; improved operational management 12 ; tighter regulations; the decommissioning of older, more emission-intensive installations; lower emissions from new fields with more efficient technology; and participation in the EU Emissions Trading Scheme (EU ETS). In 2016, CO 2 emissions from UK offshore oil and gas production contributed less than 3 per cent of total domestic CO 2 emissions. The industry has implemented several operational initiatives aligned with reducing emissions such as the creation of the Production Efficiency Task Force; innovative design choices for new installations and facilities; monitoring and reporting of energy usage and GHG emissions; reducing system leakages (e.g. to flare stack); upgrading and altering equipment to maximise operational and energy efficiency; and proposed funding for the Oil & Gas Technology Centre (OGTC) to research, develop and deploy new low-carbon technologies. EU Emissions Trading System The EU ETS is a central pillar of Europe’s long-term decarbonisation policy. By setting an effective carbon price, the scheme aims to change the behaviours of the member states it applies to, without damaging the interests of EU industries. Since the recession in 2008-09, ETS carbon prices have not been high enough to induce companies to switch to lower-carbon fuels or to promote the intended investment in low-carbon energy sources. Lower prices have prompted EU efforts to reform the market through ‘backloading’ (reducing the availability of free carbon allowances in later years).

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12 See A Pragmatic Approach to Managing Carbon Emissions in the North Sea , Tim Stileman 2017, available at www.onepetro.org/conference-paper/SPE-186114-MS

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