The fall-out from the carbon bubble bursting could devastate Scotland

Scotland might become the ‘Saudi Arabia of renewables’, as Salmond has promised, but that will mean little unless we stop being the Scotland of oil.

The importance of Scotland’s North Sea energy reserves to the referendum debate was highlighted by the UK cabinet travelling to Aberdeen. The last time the British cabinet met in Scotland was in 1921, and the symbolism of the trip was lost on no one – Cameron has come to flex the UK’s oily muscles.

And while the Yes campaign is adamant that an independent Scotland could survive with or without the black stuff, its presence is seen by the SNP as a huge asset in the event of independence.

But as Left Foot Forward reported this week, new research by the Institute for Fiscal Studies suggests that the Scottish government’s forecasts for revenues from North Sea oil are too optimistic.

Approximating the price of remaining reserves is tricky, but estimates have been further skewed by an intervention this week from the Environmental Audit Committee, telling MPs that stock markets are inflating the true value of fossil fuel reserves and in doing so creating a ‘carbon bubble’.

Basically, markets are attributing value to fossil fuel reserves which must be left unburned in order to meet emissions targets.

Markets are putting price tags on something they can never sell, at the risk of causing financial collapse.

LINK, the umbrella group for environmental NGOs, recently hosted a debate between Yes and Better Together, during which environment secretary Richard Lochhead was forced to defend plans to extract the remaining North Sea oil.

He said:

“I believe that because Scotland is an oil rich country we have more of a responsibility to tackle climate change and use the skills and revenues we get from the oil sector to build up renewables and benefit society. The world demands that until alternative energy sources come into play we have to use the fuels we have.”

“The key is we use the benefit of the oil to boost renewables. I can’t say that every single drop of oil will be taken from the North Sea but our policy is to develop the oil and gas reserves we do have. We have to look at climate change and reducing emissions but that is a separate debate.”

So in short, Lochhead can’t guarantee every drop will be taken, but he’ll try.

The problem for governments – or anyone who plans on breathing for the next 60 years – is that it makes absolutely no difference if Scotland is investing in renewable energy – as long as the policy is to suck every last drop from the North Sea, emissions will continue. Lochhead is wrong to call it a separate debate.

Depressingly, following the cross-party, cross-campaign endorsement of the Wood Report’s proposals, only the Green Party argue that some should be left underground.

The Environmental Audit Committee showed that basing economic forecasts on oil may not always be a good thing – despite its importance in the tug-of-war between Yes and Better Together.

Add in the huge cost of cleaning up the infrastructure, the rigs and the chemicals left by decades of extraction, and maybe Scotland should not worry about who gets the oil, but who has to clean up the mess the industry’s eventual, guaranteed collapse leaves behind.

The carbon bubble needs to be addressed by whichever government is in charge post-referendum, and that process can only happen by understanding that oil is not necessarily an asset to be profited from.

It is impossible for a government to simultaneously argue that oil reserves should be exploited, and that it is fighting climate change. Renewables will not reverse emissions, just lower future ones, by which point it will be too late.

The fall-out from the carbon bubble bursting would be devastating for either Scotland or the UK. And aside from the financial risk, the evidence from the IPCC is clear – if humanity is to avoid ‘catastrophic’ climate change the majority of the world’s oil must be left in the ground.

Scotland might become the ‘Saudi Arabia of renewables’, as Salmond has promised, but that will mean little unless we stop being the Scotland of oil.

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