Minimising the impact of the transition to net zero on the oil and gas industry
How can the UK oil and gas industry learn policy lessons to minimise the social and financial risks that will arise during the transition to net zero?
This is the question Professor Hafez Abdo of the University of Nottingham Energy Institute seeks to address with his latest research.
Of particular importance for our policy makers is the potential impact of the decommissioning of fossil fuel assets with financial implications that could impact the UK budget for years to come.
Several key factors and drivers are being considered as part of this ongoing research:
- Scaling back oil and gas assets will have a direct impact on investors (see Rees et al., 1996; Francis et al., 1996; Constantatos et al., 2021), therefore the projected impact of the transition to renewable energy and net zero targets will directly influence investor decisions (see van Renssen, 2014 and Mercure et al., 2018).
- The transition to renewable energy is key for a sustainable future economy; therefore, it is key to investigate the risks to vulnerable oil and gas industries associated with such a transition.
- The International Accounting Standard Board (IASB) has recently started a project aiming at constructing a new accounting standard for the extractive industries. This study will support these efforts and aim to clarify the impact of environmental regulations on the impairment of oil and gas assets.
- The UK Oil and Gas Authority expects extractive industries to have a key role in the transition to net zero, and in meeting the emission targets set in the Paris Agreement. This could result in the world's major oil and gas companies having a competitive advantage over companies dedicated to renewable energy, because of pre-existing capacity and capital (Ramus & Montiel, 2005), consequently it is crucial to understand and explain their role.
In a nutshell, I aim to address the impacts of net zero regulations on UK oil and gas assets, while offering direction for future policy."
Hafez Abdo, Associate Professor in Accounting
As well as adding to studies on accounting for pre-development expenditure of the extractive industries, this research will contribute to the debate on the impact of environmental regulations on investments, with a key outcome being the clarification of policy lessons that will minimise the social and financial risks to the stakeholders of the UK oil and gas industry as we transition to net zero.
Contact Hafez Abdo if you would like to find out more.