PolicyLens

Conservative - Energy

Restart new oil and gas licences

Issue new North Sea oil and gas licences, alongside repeal or softening of existing restrictions.

Last updated: May 2026.

Read the policy-specific methodology note

Production baseline

New licences do not quickly create production. The central case assumes planning, investment and field-development delays mean little near-term fiscal benefit by 2028-29.

  • North Sea output is structurally declining.
  • Receipts depend on prices and profits.
  • Climate-policy consistency is the main risk.

Core trade-offs

Licensing may support some investment and supply-chain work. It is unlikely to lower UK energy prices materially, and it can increase future emissions-policy costs or stranded-asset risks.

  • Producers and supply chains gain options.
  • Near-term taxpayer gains are small.
  • Climate-policy risk increases.

Fiscal impact by 2028-29

-GBP 1.0bn to +GBP 2.0bn. Central estimate: +GBP 0.1bn.

  • Positive numbers mean net fiscal cost; negative numbers mean Exchequer savings.
  • Main cost risk is tax relief and decommissioning exposure.
  • Potential offsets are fees and future production taxes.
  • Near-term output is likely limited.
  • This is not an official costing.

Economic impact by 2028-29

  • Jobs: May support some North Sea supply-chain jobs; long-run employment remains uncertain.
  • Wages: Sector wages may be supported; no broad wage effect expected.
  • Prices: Little direct bill impact because prices are internationally set.
  • GDP / productivity: Small near-term GDP effect; possible negative if investment locks into declining assets.

Assessment

New licences may matter for firms and supply chains, but the fiscal payoff is slow and highly price-dependent. The policy should not be presented as a near-term bill-cutting measure.

Confidence: Low. Production lead times and commodity-price exposure make the fiscal effect highly uncertain.

Main risks

  • Price exposure: Receipts depend on global prices rather than licences alone.
  • Stranded assets: Projects may become uneconomic under tighter climate policy.
  • Bill claims: Licences do not directly reduce domestic energy bills.

Safeguards

  • Publish field-level production and receipts assumptions.
  • Stress-test under low-price scenarios.
  • Separate energy-security claims from bill claims.

Academic evidence

Dechezlepretre and Sato, Review of Environmental Economics and Policy, 2017

Regulation and competitiveness

Environmental regulation can impose costs but competitiveness effects are often smaller than claimed.

Relevant to deregulation claims around net zero and ESG.

The Impacts of Environmental Regulations on Competitiveness (2017)

Goulder and Parry, Review of Environmental Economics and Policy, 2008

Environmental policy design

Instrument choice matters: taxes, permits and standards differ in efficiency and distributional effects.

Relevant to carbon pricing, CBAM and ZEV mandate choices.

Instrument Choice in Environmental Policy (2008)

UK government evidence

HM Treasury and HMRC, 2024

Energy Profits Levy reforms

The note raises the levy to 38%, extends it and removes the investment allowance.

Defines the oil-and-gas tax baseline.

Energy Profits Levy: reforms 2024 (2024)

Office for Budget Responsibility, 2024

OBR October 2024 forecast

The OBR scores fuel-duty, EPL and environmental-receipts measures and discusses oil-and-gas uncertainty.

Anchors energy and motoring estimates.

Economic and fiscal outlook: October 2024 (2024)

Office for Budget Responsibility, 2026

OBR fiscal forecast

The OBR forecast sets the macro, borrowing and receipts baseline used for broad fiscal context.

Prevents treating tax cuts or spending changes as self-financing.

Economic and fiscal outlook: March 2026 (2026)

Sources

Other Conservative policies

PolicyLens estimates are illustrative and should not be treated as official costings.