In this exclusive Q&A, energy policy commentator Kwaku Boakye-Adjei explains why the energy profits levy has backfired and hw a smarter fiscal framework could add £137billion to the UK economy.
Speaking to GB News, Mr Boakye-Adjei broke down how the North Sea “tax trap” could help power both Britain’s energy transition and long-term economic recovery.
Labour is being told to reconsider its tax regime on energy and encourage more investment into the UK
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Q: Why does the North Sea matter right now?
“At a time when the UK Treasury faces a severe squeeze on fiscal headroom, there is growing consensus that smarter regulation of the North Sea could unlock much-needed revenue and investment without raising taxes for ordinary households.
“The current approach, marked by frequent changes to the energy profits levy and a volatile tax regime, has driven away investment and put thousands of skilled jobs at risk.
“Industry leaders warn that unless urgent fiscal reform is enacted, the UK will continue to lose out on billions in economic value, tax receipts, and employment opportunities.”
Q: What’s the problem with the energy profits levy?
“Recent years have seen major operators withdraw investment, citing the UK’s unstable fiscal environment as a key reason. The result is a sharp decline in new exploration and development, with capital increasingly diverted to decommissioning rather than unlocking new reserves.
Ed Miliband is spearheading Britain’s net zero push | GETTY“This trend is already having a profound impact: the UK now imports over 40 per cent of its energy, a figure that is rising as domestic production falls.”
Q: How is this affecting the wider economy?
“Despite these challenges, the North Sea remains vital to the UK’s energy mix, meeting around three-quarters of national demand and supporting tens of thousands of jobs.
“The sector has also demonstrated its ability to adapt, with production emissions down by more than a third since 2018. However, experts warn that unless operators are incentivised to invest in cleaner, more efficient production, UK output will become less competitive and more carbon-intensive compared to imports.”
Q: What could the right reforms deliver?
“There is a strong fiscal case for reform. Analysis suggests that targeted changes to the current tax regime could add £137billion to the UK economy by 2050, support 23,000 additional jobs by 2030, and unlock £12billion in extra tax receipts.”
Energy bills are expected to rise this winter | GETTY Q: What specific measures are being proposed?
“One practical step would be to allow operators to defer the full funding of decommissioning liabilities, provided they reinvest capital in offshore projects and emissions reduction.
“This would free up billions for investment in electrification, carbon capture, and other technologies that support the UK’s net-zero ambitions, while also maintaining domestic energy supply and reducing reliance on imports.
“Another option is to negotiate a reduction in the government’s contribution to decommissioning refunds in exchange for a lower, but stable, tax rate over an extended period.
“This would provide the certainty investors need to commit to long-term projects, while also reducing the state’s fiscal burden. In return, operators would guarantee ongoing production, investment, and a reduced share of decommissioning liability for the Government.”
Energy experts have previously warned Britain’s increased dependency on imported oil and gas will drive prices even higher
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PAQ: Critics say the North Sea is a mature basin — is it still worth investing in?
“Critics of reform argue that the North Sea is a mature basin, with most of the largest and easiest-to-develop fields already depleted. While it is true that new projects face higher costs and technical challenges, the UK can still compete globally if it offers a stable, predictable investment environment.
“International examples show that pragmatic regulation and targeted public investment can support continued extraction while accelerating the growth of renewables and clean-energy manufacturing.”
Q: How can reform stay environmentally responsible?
“Environmental responsibility must remain at the heart of any new approach. The North Sea Transition Authority has shown that emissions can be cut significantly without sacrificing output, and further investment in electrification and carbon capture can ensure that UK production remains cleaner than imported alternatives
“By ring-fencing a portion of tax revenue from extended production for a UK green bank, the government could provide concessional finance for clean-energy and infrastructure projects, especially in regions most affected by the decline of oil and gas.”
Q: Some worry about deferring decommissioning costs — is that safe?
“Some worry that deferring decommissioning liabilities could expose future taxpayers to risk. However, with robust regulation, transparent oversight, and clear legal obligations, the UK can ensure that decommissioning is not neglected. The key is to balance fiscal prudence with the urgent need to invest in the future.”
Q: What happens if the Government fails to act?
“The stakes are high. Without reform, the UK risks not only losing jobs and tax revenue, but also increasing its reliance on more carbon-intensive imports. By modernising its fiscal and regulatory approach, the government can turn a legacy challenge into a springboard for growth, innovation, and sustainability — securing the North Sea’s role in the UK’s energy transition and economic future.”
