New research from nef and the WWF claims that the opportunity for the UK to invest in the transition to a sustainable energy system is slipping away, and the two organizations have called on the UK government to set up an oil legacy fund similar to the scheme established in Norway.

The research from nef (the new economics foundation) and the WWF reveals that, although the UK Treasury is still dependent on oil, as domestic supplies dwindle, the opportunity is slipping away to invest prudently the sector’s windfall profits. In Britain, around GBP1 in every GBP12 of government income comes from the oil and gas sector, and the researchers are asking whether, with so much income from fossil fuels, there is a powerful short-term disincentive to ‘kick the fossil fuel habit.’

At the same time, energy companies are banking huge profits, and failing to pay the cost of the damage caused by their own operations and products, the organizations say. If the Treasury’s own estimations of the social and environmental cost of carbon emissions are applied to BP and Shell’s operations and products, it would result in a total bill of GBP46.5 billion, far greater than their last reported combined profits of GBP25 billion.

Britain has squandered its windfall of natural resources from North Sea oil and gas. Instead of prudently investing the ‘unearned income’ from nature to build a safe, clean and green energy supply for the nation, we face unnecessary shortages, commented Andrew Simms, nef policy director and the briefing’s lead author.

But there is still a chance to put the proceeds from liquidating our fossil fuel assets to better and more appropriate use. Instead of oil companies profiteering from climate change and oil depletion, a windfall tax could establish an oil legacy fund to pay for Britain’s urgent transition to a sustainable, decentralized energy system, he continued.

The report’s authors say that the time has come for the UK government to force the issue by setting up an oil legacy fund to invest in the widespread transition to a sustainable energy system.

They also point to Norway as an example. Norway set up a substantial fund to invest oil surpluses to ensure that future generations would benefit once the oil was gone. At the end of 2005, the Norwegian fund stood at $210 billion, equivalent to $45,000 each to every man, woman and child living in Norway today.

The report suggests a number of ways a UK oil legacy fund could be invested in. These include a fund for innovation, development and the promotion of micro, small and medium-scale renewable energy technologies, and an advice service to help local planning authorities manage new, decentralized renewable energy services and technologies.

Making household energy monitoring devices available to increase awareness of current energy use and to make people aware of opportunities to improve, was another suggestion.