The pro-independence ‘green’ camp has an unenviable task ahead of it. In trying to convince the electorate that independence can be a positive thing for Scotland, it’s going to have to do battle with some very orthodox economic questions. These questions will undoubtedly revolve around the push for higher (or at least equal) levels of economic growth, relative to Scotland’s current performance. Central to this push will be our Gross Domestic Product, or GDP. Yet while the inadequacies of GDP as an economic indicator continue to be identified and outlined, these objections are seldom reflected in policy circles. GDP, particularly from a ‘green’ point of view, continues to have undue influence in the world’s economic and political discourse.
GDP is simply a measurement of the value of all goods and services produced within an economy, usually examined over the course of a year. It is a measure of economic activity, having very little to say in the way of distribution and equality – or on the value of the natural environment, for example. Nevertheless it remains the economy’s key performance indicator and, as such, will be a potentially vital tool in the armoury of both sides of the referendum debate. In Scotland, a very substantial part of our GDP comes from the energy sector. Consequently and conversely, this sector’s interests (at least to a certain degree) are reflected well in policy circles.
Much has been made of Scotland’s new ‘love in’ with renewables. Over the first decade of the 21st Century, the renewables contribution to our electricity consumption has been impressive (rising from 12% in 2000 to over 24% in 2010[i]). Furthermore, over the next ten years, the potential increase in both onshore and offshore wind will dwarf this: going from under 2.1GW of installed capacity in 2010, to as much as 17.7GW by 2020[ii]. This is to say nothing of the more infant renewable technologies (wave and tidal) that are in development, as well as our well-established hydro-electric capabilities. We frequently hear rhetoric from our politicians regarding the amount of renewable energy that Scotland potentially has at its disposal, something they seem keen to exploit. And there can be no doubting the advances that Scotland has made in renewable energy over the last decade. All the parties responsible deserve praise for their efforts – including the (pro-independence) SNP/Green minority and SNP majority administrations since 2007.
Yet for almost half-a-century Scottish nationalism and independence have become, to a large extent, intertwined with North Sea oil and gas production. Pro-independence advocates have been able to fall back on the financial muscle that it provides as evidence that Scotland would be able to ‘go it alone’. Almost an entire independence movement has been able to be (relatively) successful by highlighting its value and by attaching itself to this one single issue – such is society’s reliance on oil and fossil fuels.
North Sea oil and gas is an enormous contributor to Scotland’s economic activity and GDP statistics. Since it was first discovered in the 1960s, its direct tax contributions to the UK Exchequer have totalled £300 billion[iii]. Despite the extraction of over 40 billion BOE (barrels of oil equivalent) from the North Sea, estimates suggest that between 14 and 24 billion are still to be exploited[iv]. Of the 440,000 UK jobs supported by the oil and gas industry in 2010, a substantial proportion – 196,000 – were based in Scotland[v]. Even further still, one recent report – by Glasgow University’s Centre for Public Policy for Regions – suggests that Scotland’s relatively poor economic performance has been somewhat concealed by oil and gas production. The report suggests that in 2011, when this production was excluded from the comparison, Scotland’s economy grew only 0.5%, in contrast to 1% for the UK as a whole[vi].
Multinational oil companies obviously have bad public image, but just imagine the defence that could be constructed by highlighting this level of importance: Tax revenues from North Sea oil and gas production help pay for Scotland’s schools, teachers, universities and public research. It helps to finance our hospitals as well as fund our doctors, nurses and carers. Taxes from North Sea companies go towards improving our rail links, our electricity and communications infrastructure and our welfare system. These can all be measured, adequately, through analyses relating to GDP.
But there are certain things, both relevant and important, that fail to be adequately represented. One of these is acutely contemporary. The global detrimental impact on the environment resulting from years of carbon emissions is not measured in any orthodox economic way. The world has an unquenchable thirst for burning fossil fuels, and Scotland – amongst many other nations – is helping to fuel the supply. In return, we are benefiting very heavily financially, but at the price of borrowing from the future. We are borrowing from something that cannot be measured quantitatively, and so by extension, is usually ignored or devalued when it comes to formulating policy. This has led to a situation where the ecological imperative of renewable energy has been diminished.
All the while global warming continues apace[vii], undeterred by our indecision: we like renewables, but we don’t like them quite as much as we like oil and gas. Such a stance undermines the ultimate reason for pursuing renewable energy. Yes renewables might help to diversify our energy mix, reduce the marginal price increases of traditional fuels and guard against insecure supply lines – but the fundamental reason for pursuing such a policy is ecological. Will green energy advocates, in a decade’s time say, be left to lament society’s uncertainty?
As ever in economics there are trade-offs. Trying to make one set of people (ourselves) better off, without making another set (the future generations of this planet) worse off is a hard task. Over the next few years, the importance of the ecological imperative is unlikely to be adequately reflected in the referendum debate. That doesn’t mean that the ‘green’ argument (of sustainability and decentralisation) for independence isn’t a valid one. Nor does it mean that our carbon reduction targets should be considered – as Mr Trump puts it – ridiculous. It’s just that, once oil is removed from the equation, Scottish independence becomes – as it always has – a much harder argument to make. As I said, it’s an unenviable task.