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Energy - Taking forward our National Conversation


Executive Summary

This document forms part of the ongoing National Conversation, which aims to promote an inclusive, open and full debate about available constitutional options. As the culmination of this engagement, we will publish a White Paper on St Andrew's Day 2009. We will then introduce a Referendum Bill to Parliament in 2010 so that a referendum can be held on Scotland's constitutional future.

It outlines the energy choices that would be available to Scotland under extensions to the devolution settlement and independence. It looks at the recommendations of the Commission on Scottish Devolution and considers what the Scottish energy market could look like with increased Scottish responsibility under the possibilities of either devolution max, where Scotland stays within the United Kingdom with increasing rights and responsibilities falling to the Scottish Parliament and Scottish Government, and also under full independence.

Current Energy Policy

Scotland is an energy rich country with the resources, skills, technology and ambition to be a world leader in sustainable energy. Energy is already a key part of the Scottish Economy. For example the oil and gas sector has been a crucial part of our economy for many decades and continues to be so. Alongside this we are now developing our enormous renewable and low carbon energy potential. We can point to real and substantial progress in a number of areas in recent years. Looking ahead, Scotland is well placed to provide the renewable electricity which will increasingly be required in order to meet future targets and commitments. We can also play a vital role in assisting countries who are unlikely to meet their own targets by themselves by exporting our renewable resources, which will bring about considerable economic benefits to Scotland.

Aspects of energy policy which are currently devolved include planning, promotion of renewable energy, energy efficiency and emergency planning. However, the current constitutional settlement does place barriers in the way of our ambitions for this energy. Not having the full armoury of powers at our disposal means that Scotland's ability to bring about the changes we want to see happen and the ambitions we have is severely constrained. The recent report by the Calman Commission considered the case for greater powers to be devolved to the Scottish Government, including the possibility of revenue from oil and gas. The Commission did not see a case for any significant changes from the current position, despite its own independent expert group clearly setting out the benefits of creating an oil fund, and finding that North Sea revenues could be devolved in principle. However the Commission did emphasise the need for better cooperation between the two Governments on a range of issues, including on energy.

In our view, the Commission failed to recognise that there are a number of specific areas such as transmission charging and support for energy efficiency where Scotland is limited in what it can achieve by the status quo. Greater responsibilities would mean that we could take forward Scottish priorities and work more effectively in partnership with the UK and EU neighbours to secure affordable energy supplies for consumers and industry and also help to develop even more the contribution of energy to Scotland's economy. Greater autonomy over energy issues could help deliver our social policies such as alleviation of fuel poverty and tackling poverty more broadly. Importantly, we believe that we should have responsibility over the fiscal regime in the North Sea which would allow us to ensure that the tax system incentivises extension of the life of North Sea oil and gas fields and enables us to set up an oil fund for Scotland to generate long lasting wealth from this resource.

There is enormous long-term potential within Scotland for energy. For example a proposed North Sea Energy Grid would encourage renewable generation and electricity exports from Scotland, while also contributing to future energy security in Europe and helping address the challenges of climate change. An independent Scotland would ensure that Scottish Ministers were able to negotiate for the benefit of Scotland in the EU.

With greater fiscal autonomy the Scottish Government could also tailor the North Sea tax and regulatory framework to reflect the challenges experienced by operators in developing new fields, and to ensure that extraction levels are maximised. Devolving responsibility for the North Sea fiscal regime would also allow the Scottish Government to invest a share of the returns from oil and gas production into an oil fund. This would allow a proportion of Scotland's oil revenue to be converted into a pool of renewable assets, generating long term wealth long after North Sea oil and gas reserves have been exhausted. An oil fund could also act as a short term stabilisation mechanism, to provide a fiscal stimulus when the economy slows or to offset a temporary fall in tax receipts.

Key Issues for Discussion:

  • How greater Scottish responsibility for energy market regulation could deliver better opportunities to Scottish business and also a better deal for Scottish consumers;
  • How we could ensure that the oil and gas industry continues to have a long-term presence in Scotland;
  • And how reducing energy demand, including by providing greater assistance for consumers, can deliver benefits both to individuals and the Scottish economy.

This paper does not represent or present specific future policy commitments but it does set out a number of ideas and options for the future. We welcome ongoing discussions regarding energy as part of the National Conversation. Comments on this paper can be made through the National Conversation website at www.anationalconversation.com or e-mail joinin@anationalconversation.com.