Executive summary
The United Kingdom’s energy transition is poised for its
next phase
The IEA peer review of the United Kingdom (UK) took place over 20-24 November 2023 The review came at a timely moment, as the United Kingdom is in the
process of reviewing its energy transition strategy to align with industrial and
energy security goals.
The United Kingdom was one of the first major economies to legally establish a
net zero target in 2019. It was also an early mover in setting legally binding carbon
budgets and carbon pricing as well as creating an independent body, the Climate
Change Committee, with statutory authority to track the government’s progress
toward its climate targets.
Decarbonisation strategies
To underpin its net zero target, the United Kingdom has developed a number of
supporting plans, including the Industrial Decarbonisation Strategy in 2021, which
was the first of its kind to set out a pathway for achieving net zero emissions in
industry. It includes a roadmap that outlines key technological signposts as well
as policy actions on the path to net zero. The Strategy estimates that GHG
emissions need to fall by at least two-thirds in the sector by 2035 and by at least
90% by 2050, including 3 Mt CO2-eq through CCUS by 2030 (and 14 Mt CO2-eq
by 2050) and 20 TWh by switching to low-carbon fuels. It also notes that energy
efficiency measures across industry could result in GHG reductions of
4 Mt CO2-eq by 2050. The Strategy is due to be updated in 2026.
Industry structure
The United Kingdom’s oil and gas sector is dominated by production from offshore
areas across the UKCS and almost 300 fields. Previously, the oil and gas majors
dominated, but in recent years investment in the North Sea has seen increased
activity by independents and private equity-backed players. However, a few large
international majors still account for 35% of reserves and over 15% of all UK
licensed acreage, which includes significant legacy acreage retained from earlier
licensing rounds. Private equity-backed and independent companies are now one
of the larger acreage holders, with over 50% of net acreage.
Overall, the oil and gas industry brings sizeable economic benefits to the
United Kingdom, including on average GBP 16 billion to the UK economy annually
(2018-22). The sector supported around 200 000 British jobs in 2021 (direct,
indirect and induced), approximately 43% of which were based in Scotland, and
is expected to pay around GBP 28 billion in tax revenue over the next five years.
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