19 / 84
19
1
2
3
4
5
6
7
8
9
10
11
As a major energy-consuming industrial sector, almost all the UK upstream industry, comprising offshore
platforms and onshore terminals, falls within the scope of the EU ETS. In 2014, the EU ETS captured 95 per cent
of total upstream CO
2
emissions. Installations responsible for any CO
2
emissions are required to monitor and
verify such emissions and to surrender allowances to cover all their emissions each year. Since the industry is
deemed to be at risk of carbon leakage, installations receive some free allowances based on an assessment of
historical performance relative to an industry benchmark but no free allowances are allocated for emissions from
electricity generation. Offshore platforms are not connected to the onshore grid, so they have to generate their
own electricity using produced fuel gas for all operational needs. This accounts for more than half the total CO
2
emissions from UK offshore installations. The effect of the ineligibility of emissions from electricity generation is
that, uniquely among the six largest industrial sectors in the ETS, upstream oil and gas is short of allowances and
has to purchase them in the market each year to meet their ETS obligations.
Figure 8: UK Upstream Offshore Sector Emissions and Allowances
0
2
4
6
8
10
12
14
16
18
2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
GHG Emissions (Million tonnes CO
2
)
Total Emissions
Other Sources
Electricity Generation Free Allowances
Source: BEIS, DG CLIMA, Oil & Gas UK projections
Total UK Offshore
CO
2
Emissions
Phase II (2008-12) 14.2 mt per annum
Phase III (2013-20) 11.3 mt per annum
Phase IV (2021-30) 8.6 mt per annum
Phase II
Phase III
Phase IV
In 2015, upstream installations within the ETS emitted 15.6 million
tonnes (mt) of CO
2
, up 4.9 per cent from 14.9 mt in 2014
13
. Offshore
installations accounted for 12.7 mt of this figure (+5.6 per cent)
and onshore oil and gas terminals handling offshore UK production
were responsible for a further 2.9 mt (+1.7 per cent). An estimated
6.6 mt (52 per cent) of all offshore CO
2
emissions were attributable to
electricity generation. The increase in total CO
2
emissions in 2015 was
smaller than the increase in hydrocarbon production (+10.4 per cent),
indicating a decline in the carbon emission intensity of upstream
operations contrary to the longer-term trend towards higher intensity
observed since 2000 as resource depletion has proceeded.
13
Source: DG CLIMA EU Transaction Log (2016)
.
Carbon emission
intensity declined
in 2015 contrary to
the long-term trend.