Prime Minister David Cameron and Chancellor George Osborne have made it clear that they wish to build a new fleet of nuclear power stations and further to exploit the gas reserves locked up in the UK’s shale deposits. The Conservative government at Westminster are now undertaking an economic ‘charm’ offensive to convince the general public and other stakeholders that both nuclear power and on-land shale gas extraction are good for the economy of the UK, and that any associated risks are manageable through planning and regulation.

The devolved administrations of the UK, however, are taking a far more precautionary approach (and in fact in some cases, have ‘no’ say on nuclear power), with Northern Ireland recently adopting what amounts to a planning ban on fracking for shale gas, there is a fracking moratorium in Wales, and in Scotland a fracking moratorium has now been extended to include the controversial technique known as underground coal gasification (UCG).

It is against this backdrop, that we reflect on the Conservative government’s energy position and analyse the implications of UK energy policy, with a particular emphasis on Scotland. With the Scottish National Party (SNP) annual conference now underway, we also consider wider constitutional consequences.

Public Opinion on Nuclear Power and Shale Gas

With mixed public opinion for new nuclear build and a palpable drop in public support for on-land shale gas extraction it appears unwise for the Conservative government and particularly their Secretary of State of Energy and Climate Change, Amber Rudd, not to reflect a little deeper on some of the implications of its current crusade on nuclear power and fracking. The current approach suggests to us that the Conservative government is more fixated on generating new tax take (and profits for large energy companies) rather than ensuring public concerns, and society’s long-term welfare, are fully addressed.

Is it just about the economy?

Belief in a nuclear and shale gas boom appears to run deep within Conservative Party ideology, reflecting its free market tendencies: it is being promoted by the Prime Minister, Chancellor, Ministers with responsibility for Energy (such as Andrea Leadsom) and by Scottish Conservative MSPs (such as Murdo Fraser Convenor of Hoylrood’s Economy, Energy and Tourism Committee). Combined with those with major economic interests, the Conservative government’s energy policy appears to rest predominantly on the claims of the economic benefits that nuclear power and fracking will generate, including new tax take, job creation and reduced heating and lighting bills for consumers.

Setting aside for now wider concerns, are such economic claims credible when it comes to shale gas?

The Shale Gas Mirage

Although the economic benefits of shale seem to glitter, we don’t think it is actually, made of gold. Indeed, the UK lacks basic on-land fracking gas infrastructure and a skilled supply chain, while some of the companies involved are not based in the UK and so are likely to channel profits to overseas investors. Furthermore, in the current climate of falling oil prices, rock bottom gas prices, and a European gas market that is unlikely to be sympathetic to British shale gas, the very logic of rushing into fracking appears as unstable as a shale bed after it has been fracked. These are serious risks to the economics of onshore extraction, which are compounded when combined with the wider concerns over fracking activity.

What are these wider concerns?

Even if on-land shale gas extraction eventually proves economically feasible in the UK, the benefits accrued by the few people who will share the spoils must be balanced against the need to protect land, the use and contamination (from for example ‘flowback’) of valuable water resources, broader health concerns, as well as the visual impact of multiple gas pads, never mind the potential for land tremors. It is crucially important that the UK learns from the environmental, safety and health concerns that are now being more fully reported, as well as the permitting and regulatory failings that have become apparent in the US dash for shale gas.

There are also major concerns that the opening up of such major fossil fuel reserves is incompatible with greenhouse gas emission targets of the UK and its component parts, including Scotland. With the fast approaching UN climate change conference in Paris, Conservative government shale intentions will surely prove to be an awkward conversation for Amber Rudd, particularly as this follows the early closure of the Renewables Obligation (RO) scheme, the slashing of solar power support, and other recent decisions, all of which Al Gore, the former vice president of the United States recently considered to be somewhat puzzling.

This article is for information and discussion purposes only and does not form a recommendation
to invest or otherwise. The value of an investment may fall. The investments referred to in this
article may not be suitable for all investors, and if in doubt, an investor should seek advice from
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