Labour should learn from Jacinda Ardern’s calamitous oil and gas ban
17 June, 2024, 10:54 AM
In the UK, the Labour party has pledged to halt any new oil and gas drilling in the North Sea, which the Tories today suggest could cost billions in tax revenue over the next ten years.
When it comes to energy policy, Labour could really benefit from looking at what happened when New Zealand’s Labour party tried the same thing in the South Sea.
Six years ago, the Jacinda Ardern government enacted a similar policy in New Zealand. Today, gas-dependent industrial sectors find themselves with something of a python around their necks. Politicians here in this nation of 5.5 million have even begun to openly fret about the country’s ability to keep the lights on.
Indeed, one of the first policy decisions of the conservative National party government of Prime Minister Christopher Luxon has been to bin the policy. Luxon’s regional minister, Shane Jones, who in a former political life was himself a Labour party minister, says that the Ardern edict was spurred by ‘green gullibility’, courtesy of a ‘woke-riddled left’.
Not only did the New Zealand ban halt the exploration needed to identify vital new sources in the here and now, it also stopped investment in further development of the country’s known gas fields needed to sustain the current and future levels of use.
Absent such investment, New Zealand’s natural gas production has dropped to its lowest level in almost 30 years, according to the country’s Ministry of Business Innovation and Employment.
The government wants to pull out the stops over the next two years to woo back departed investors and bring in new licences – even as the Thunbergian 29-year-old leader of the Green opposition, Chloe Swarbrick, argues that this is only‘tipping oil and gas onto the climate crisis fire’.
The industry group Energy Resources Aotearoa says it’s thrilled the ban is being lifted.
Although in some sectors it may be a case of too little too late. Gas-dependent fruit and vegetable growers, for example, say they desperately need cheaper energy or else they face the prospect of exiting the business altogether as energy costs rise and gas supplies tighten.
Ellery Peters, an energy engineer from the umbrella group Vegetables New Zealand, told a recent Carbon and Energy Professionals conference that natural gas makes up a large proportion of the sector’s emissions. Growers are now dealing with drastically ricocheting prices and availability.
Supply contracts are getting smaller, and, in some cases, growers are being told they must ‘shut off their supply now’, he said.
Elsewhere, a similar dirge is being heard from other gas-dependent sectors, including universities, chemical processors and electricity generators.
Part of the problem has to do with the previous government’s emphasis on decarbonising simply by turning things off rather than switching energy sources.
Fundamentalists, after all, are only interested in renewable energy sources, not lower carbon options. But, as New Zealand now knows and the UK may yet discover, renewables – even the impressive wind farms that have been created along parts of the country’s shoreline – aren’t sufficient for a lot of advanced industrial processes.
The New Zealand media, which tended to be docile during the Ardern years, largely ignored the predictable consequences of this decision, even though in some cases it was staring right at them. A few years ago most of the country’s glossy magazines ceased publishing at around the same time – a development variously blamed at the time on the dwindling economics of the media business and supply-chain issues during Covid. Ultimately, however, the gas exploration ban had at least as much to do with it. The magazines were printed at the same North Island plant, which was forced to close its doors over concerns about its long-term gas supply contract for its wood processing and paper plant.
Some of the country’s biggest manufacturing export industries – fertiliser manufacture Balance, NZ Steel and the global dairy product giant Fonterra – are all based in the country’s regional heartland and find themselves in a similar bind. In an ironic twist, companies such as the energy supplier Genesis Energy are having to import coal, which has higher emissions.
What does this mean for the UK? John Pagani, a New Zealand-based consultant to the oil and gas sector on the politics of energy transition, points out that while the policies of the respective Labour parties may be the cut from the same ideological cloth, the settings are not.
The UK is connected to a grid and uses a lot more coal. It has access to nuclear power. Sensible pricing, Pagani believes, should help a more stable transition.
‘The main lesson is that you can’t successfully look at only one corner of energy policy – decarbonisation,’ he said after the launch of the British Labour party’s manifesto. ‘You need to keep security of supply and affordability in balance as well’. It’s when a nation simply switches things off, as New Zealand did, that you create an ‘expensive, avoidable mess’ that doesn’t even ultimately help to decarbonise.
There is food for thought here for the British campaign frontrunners. And something to mull over a strong coffee in New Zealand. Assuming, that is, the gas supply to the Antipodean stove is still flowing.
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