UK government sets up dedicated ‘Energy Security and Net Zero’ department

Prime minister Rishi Sunak breaks up the Department for Business, Energy and Industrial Strategy to re-establish a dedicated energy department as part of a cabinet reshuffle.

The British government has established a new Department for Energy Security and Net Zero as part of a reshuffle that will break up the Department for Business, Energy and Industrial Strategy.

The decision to re-establish a dedicated energy department, announced on February 7, comes almost seven years after the Department of Energy and Climate Change became part of the BEIS in 2016. On the same day, the BEIS announced fresh investment in hydrogen and all-electric flights, as well as a new scheme to make existing heat networks in England and Wales more energy-efficient. 

The government said the new department, which will be led by current BEIS secretary of state Grant Shapps (pictured, on the left, next to prime minister Rishi Sunak), “has been tasked with securing our long-term energy supply, bringing down bills and halving inflation”. 

“The move recognises the significant impact rising prices have had on households across the country as a result of Putin’s illegal war in Ukraine, and the need to secure more energy from domestic nuclear and renewable sources as we seize the opportunities of net zero,” it added.

A combined Department for Business and Trade has also been formed.

Alexander Stafford MP, who chairs the All-Party Parliamentary Group on environmental, social and governance, welcomed the formation of the new energy department.

He added that its creation “must lead to a scaling up of the UK’s net zero ambitions, with ESG considerations positioned at the core of the Department for Energy Security and Net Zero’s strategy. This newly created department must grasp the clear opportunities provided by ESG frameworks for the race to net zero”.

Bob Ward, policy and communications director at the Grantham Research Institute, said the department’s formation “shows that MPs on the right of the Conservative party have failed to win the argument for weakening climate policy”. 

“However, a more important question is whether the new department will be able to persuade other departments and the Treasury to accelerate action on cutting greenhouse gas emissions across the economy outside the energy sector,” he added.

Others, including Greenpeace UK director of policy Doug Parr were less enthusiastic.

“As climate disasters intensify, energy costs spiral and the world continues to sink under rising seas, without other fundamental reforms, re-establishing a department for energy will be as helpful as rearranging the deck chairs on the Titanic,” Parr said. 

“It’s government policy and underinvestment that is holding back real action on the climate and energy crises, not the departments or ministers in place,” he continued.

“Unless the new-look Department for Energy [Security and Net Zero] is given the freedom and funding to rapidly scale up renewable energy production — both offshore and on — to shore up domestic supply, as well as roll out a nationwide scheme to insulate the tens of millions of energy-wasting homes across the country, what’s the point?”

BP slows emissions drive

The reshuffle took place on the same day that BP announced record underlying profits of $27.7bn, a week after fellow oil major Shell posted its own record adjusted earnings of $39.9bn. Oil and gas companies’ profits have surged as a result of increases in energy prices following Russia’s invasion of Ukraine.

Last year, the UK government imposed a windfall tax on oil and gas companies’ “extraordinary” profits in order to fund a support package aimed at helping those most vulnerable to rising energy costs. 

Record oil profits have fuelled calls for heavier taxation, with the Labour party’s shadow climate change and net zero secretary, Ed Miliband, railing on Twitter against Sunak’s apparent refusal “to bring in a proper windfall tax”.

“This new department should be the start of the UK government holding the oil and gas industry genuinely accountable for their climate performance,” said Tessa Khan, executive director of Uplift, a campaigning organisation focused on the oil and gas transition.

“At the moment, the industry’s targets for reducing upstream emissions from the North Sea are not only too weak, they’re also voluntary,” she told Sustainable Views.

“This should be the beginning of a much more serious approach to aligning the industry with our carbon budgets.”

BP also announced that it had softened its commitment to cut oil and gas production and reduce its emissions. It will now aim to scale back its oil and gas production by 25 per cent by 2030, instead of a previous target of 40 per cent set against a 2019 baseline.

The oil giant is also seeking a fall of 20 per cent to 30 per cent in emissions from the carbon in its oil and gas production at the end of the decade, lower than the previous aim of 35 per cent to 40 per cent. 

However, it said that it will invest up to an additional $8bn by the end of the decade in its “transitional growth engines”, with its cumulative investment in areas including bioenergy and hydrogen sitting at around $55bn to $65bn from 2023 until 2030. 

“With such clamour for energy sovereignty and security, and prices remaining historically elevated, in the short term the transition to renewables will be impacted as BP looks to take advantage of these trends,” Quilter Cheviot equity analyst Jamie Maddock said. 

“With an election cycle just around the corner in the UK, the issue of energy company profits is only going to become more politicised and more controversial for as long as they remain extraordinary.”

Maddock told Sustainable Views that the creation of a new energy department was unlikely to help investors significantly, unless it resulted in “expedited planning permissions” and “a stable regulatory and fiscal environment that incentivises investment into renewables, infrastructure and domestic manufacturing”.

AJ Bell investment director Russ Mould said: “Oil and gas firms have already seen their taxes increase, yet they’ve been able to offset some of this amount by accounting for investments in areas such as decommissioning oil platforms.

“The more money companies like BP make, the stronger the calls for them to give some of it back through tax.” 

Photo credit: Jamie Lorriman/Getty Images