Paris, Glasgow, and now Dubai – with COP28 now in the rear-view mirror, the world has decided where its future lies.

Too slow, too limited, too hesitant it may be, but the direction of travel is clear. Our future will no longer depend on fossil fuels. In a world of uncertainty, that is one thing upon which we can rely. Gauging the speed and recognising the levers won’t be easy but at least we can rely on the fact of fundamental change.

For businesses, it will shape the decisions they make and the more hard-headed they are, the more they’ll take the tough choices. Petroineos’ warning that Grangemouth could close its oil refining capacity in 2025 was rightly characterised as a blow to the local economy and to Scotland more generally but it should also be recognised for the realism it portrays. Oil is not where the future lies and not where investment will produce best returns.

Companies that don’t see that will create expensive stranded assets and shareholders will increasingly need to question managements that proceed as if the world hasn’t changed. They might well ask why, in building a new pipeline from Fawley to Heathrow with 140% of the capacity of the present link, ExxonMobil has not taken account of UK Government’s legal commitment to significant reduction in aviation’s use of fossil fuels? Increasingly, oil companies will need to show investors that they recognise the world has changed and that their investments are in step with net zero in 2050.

John Gummer speaks during the E-FWD launch event in November 2023, Aberdeen.

The global context

Not least is this true in the United States, where the Biden administration’s Inflation Reduction Act has created an entirely new context for American industry. The world’s mightiest economy is rewarding sustainability in an enduring way and creating a significant commercial and industrial base where profits, jobs, and exports depend on these fundamental changes and the investment they have made possible. For the first time, occupancy and vested interests will support the new system driven by clean energy instead of shoring up the old ways.

Oil is not where the future lies and not where investment will produce best returns.

In the EU the direction is also clear, partly in response to the game-changing decisions in the US but more importantly because leaders have seen that opting out of this new world is not realistic. No doubt, for immediate electoral advantage, some political parties will seek to suggest easier ways and lighter burdens but the overall course is set and, as the effects of climate change become ever more obvious and damaging, the pace of change will quicken. Dirty fuels are expensive fuels and the market will make clean energy adoption essential if EU businesses are to compete.

At the same time Japan, Korea, and India are making fundamental changes in their structures to recognise the inevitability of transition. However, it is China that serves as the greatest challenge. Yes, it is still expanding fossil fuel generation but that must not hide its much greater extension of clean energy production and its detailed plans for the fastest expansion of offshore and onshore wind and solar photovoltaics the world has yet seen.

Nor should we forget that China is weaponising the transition. Already the global supplier of solar panels, it is determined to dominate the market for electric cars. Its imperialist expansion – especially in Africa – has enabled it to control many of the resources the new economy will need. This co-ordinated policy will make its state-run capitalism a huge factor in the global politics of transition.

Leveraging our strengths

So, what in this new world should Britain be doing? How are we to cope with the inevitable transition, remain competitive, and play a sufficient global role. We have foolishly chosen isolation from our natural partners in the rest of Europe and we have to make the best of that. We haven’t the resources to introduce an all-encompassing framework to compete with the US or mainland Europe.

For us, our democratic system and respect for human rights makes China’s centralised, authoritarian solution impossible. Yet, we are an ingenious, inventive, imaginative people with first-tier universities, significant research capabilities, and some important natural advantages. Even so, this could still just result in the relegation of the United Kingdom to the status of an incubating adjunct to American business – the place for start-ups which take off elsewhere.

If we get the skills right, Scotland could lead the UK’s energy transition.

So, first we have to build up our acknowledged strengths. The Government’s decision to rejoin Horizon was at last a recognition that our universities would lose their pre-eminent place if they were isolated from the rest of European academia. It has also recognised the need for serious research and development budgets and it has begun to tackle our fundamental shortage of skills in the workforce. However, our education system needs real overhaul if it is to produce the men and women capable of taking advantage of the green jobs we will create.

Nowhere is that more important than in Scotland, where recent educational policy has been a spectacular failure. It is the part of the United Kingdom which is pivotal in the transition and yet where its education, which was once the envy of the rest of us, it is now inadequate from primary level right up to Higher Education where Scotland’s fine Universities are starved of finance because of political dogma. Yet, if we get the skills right, Scotland could lead the UK’s transition.

No turning back the clock

That’s if we build on our strengths. We can’t compete across the board but we can win on offshore and onshore wind; interconnections which reduce intermittency; and carbon capture usage and storage. All that should put Scotland in pole position and enable us to replace the jobs and income from North Sea oil. That makes the reversal of the Government’s continued licensing of oil exploration particularly important. We should be investing in the new, not the old. In a world which will be awash with oil within a decade, this is not where we should waste our resources.

Britain can make this transition the key to a prosperous future but it has to move fast or the investment will go elsewhere.

Instead, our real priority should be infrastructure. Our cheaper renewable energy must get to where it is needed. We are still far too slow in revolutionising the grid; too slow in improving energy efficiency; and too slow in reforming building regulations. We’ve foolishly gone backwards on electric vehicles and new boiler installations but at least the Government has seen sense to revise its assessment of costs so that the halt in offshore wind development has been reversed.

Now that the direction of travel is clear, the issue is urgency.

Britain can make this transition the key to a prosperous future but it has to move fast or the investment will go elsewhere. If we accentuate the positive, commercialise our creativity, give our people the skills to maximise the benefits of the green economy, and regain our political courage we can be a winner. Energy is the key and recognising that is the essential ingredient for our national resurgence.

John Gummer, The Rt Hon The Lord Deben, is Chairman of Sancroft International and former Chairman of the Climate Change Committee

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