Mark Carney said that it was “not right” for countries with oil and natural gas industries to “shutdown overnight”, admitting fossil fuels play a part in net zero.
Former Bank of England Governor, John Major, said that before reducing oil and gas production it is important to “build the alternatives”, adding that “divesting your way to zero” was not possible.
He said, at an event held by the International Monetary Fund’s annual meeting in Marrakech: “In economies with conventional energy — that is oil and gas production — these cannot be shut down overnight. This is not right. This is not a fair transition.
“You must build alternatives. You must work with communities, train the people, go through the transition, and finance all of these elements. “And they are equally deserving.”
Mr Carney, , who is now the UN Special Envoy for Climate Action and Finance,, added:
You can’t divest yourself overnight to reach net zero. You have to invest all along the chain.
In an interview earlier this year, Carney stated that the war in Ukraine showed the oil and natural gas system, “doesn’t provide energy safety, it’s incredibly volatile”, while encouraging the manipulation by the Opec cartel.
“Our system is very expensive.” It’s volatile. It is unreliable and unsustainable. “It reinforces not only the importance of sustainability, but also energy security in that energy system,” he said.
Vladimir Putin said at the Russian Energy Week in Moscow, that the Opec+ cartel will most likely extend the oil supply cuts imposed by Saudi Arabia. This is the strongest indication to date that Opec+ will continue its supply cuts well beyond 2024, and possibly even further. Brent crude, which is the international benchmark for oil prices, has fallen 1.25pc to $86.50 per barrel despite the comments.
Top City analysts have warned that the move to net zero could lead to further spikes in global inflation as the plunge in investment in oil production and gas leaves little room for spare capacity on a tightening market.
Trevor Greetham, Royal London Asset Management, warned that a new “spikeflation era” was coming due to geopolitical risks, high debt and net zero.
The reason is that major oil and gas firms are cutting back on investment in new capacity because they plan to move away from fossil fuels.
“They don’t build a lot deep water oil platforms, so they don’t have the spare capacity to use now. When you have a surge in demand, there is nowhere for it to go. This causes a spike in price.
Every business cycle will experience a commodities shock in this transition period, because we still use fossil fuels while decreasing the supply slowly.
This week, Mr Carney endorsed Labour’s shadow chancellor Rachel Reeves during the party conference in Liverpool. Labour leader Sir Keir starmer has promised to stop North Sea oil exploration. However, he has also confirmed that any Tory decision to approve oil exploration will be honored by a Labour Government, including Rosebank oilfield, which is the UK’s most underdeveloped oil field.
Ed Miliband (Labour’s shadow secretary for energy) attacked the Rosebank oilfield earlier in 2023, calling it a “colossal wastage of taxpayers money and climate vandalism”.
Labour’s comments come after Prime Minister last week pushed back on some net zero policies.
Rishi Sunak has delayed the ban of oil boilers and new petrol and diesel vehicles from 2026 until 2035.