Carbon Takeback Obligation: A Get-out-of-Jail-Free Card?
It is not possible to mitigate the climate impact of new fields like Rosebank and Jackdaw. Yet that has not stopped some from trying. As debate intensifies over upcoming decisions on the Rosebank and Jackdaw fields, the proposal of capturing their emissions - through a carbon takeback obligation (CTBO) – has gained some attention.
In this briefing we will detail why a CTBO applied to new fields like Rosebank and Jackdaw would be ineffective and costly, not to mention the risk of giving oil and gas companies a get-out-of-jail-free card for continued drilling.
What is a Carbon Takeback Obligation?
A CTBO is a proposed policy which would require fossil fuel producers to permanently store carbon dioxide (CO2) as a condition of their licence to operate.
The idea is that, at the point of net zero, all CO2 emissions from fossil fuels still being extracted are permanently geologically stored, achieving “geological net zero”, i.e. carbon produced is balanced by carbon stored.
In reality, introducing the obligation would carry costs its proponents have not accounted for and risks handing the industry a get-out-of-jail-free card for further extraction and extending our reliance on expensive fossil fuels.
What is driving the calls for a Carbon Takeback Obligation?
The idea of making producers responsible for the impacts of what they sell is nothing new: it is already established practice in sectors such as textiles, plastics and electronic waste.
The proposed CTBO tries to follow suit by placing some responsibility at the top of the energy value chain. Initially, fossil fuel producers would be required to store a small percentage of their CO2 emissions, e.g., 5%, with the obligation increasing to 100% by 2050, and potential for a net-negative obligation past net zero.
Its proponents sell the idea of a ‘net zero oil and gas industry’ on the promise of a range of benefits. A CTBO, for example, could act as a “backstop” for emission targets, allowing the Government to halt extraction or render fossil fuel projects unprofitable by rapidly increasing the carbon storage obligation. Producers could also face strict penalties for failing to meet their targets, including having their licenses revoked.
Most notably, a CTBO is presented as a means to fund carbon storage facilities. Under this proposal, fossil fuel companies would carry the responsibility for developing carbon capture and storage (CCS) and carbon dioxide removal (CDR) capacity and infrastructure, and not the public purse.
What are the risks of a Carbon Takeback Obligation?
The biggest and most obvious risk is that the oil and gas industry continues extracting fossil fuels without consequences for years to come. In fact, the proposed series of storage targets (potentially 10% by 2030 or 2035; 50% by 2040 or later; 100% by 2050) could incentivise the industry to extract as much as possible in the years when no obligation or a low obligation is in place.
And yet, the obligation cannot simply be set higher if the Government expects producers to absorb the costs. If applied now to new field consents, an obligation that is low enough for producers to stomach would see very little capture and storage capacity built in the timeframe the UK Government wants to scale it, not least because there are few significant new fields left to apply it to. Applying the obligation to existing production would also be difficult, as there’s currently no regulatory framework for making a CTBO a requirement for field consent.
Moreover, a project with a field large enough to raise the revenue required to fund CCS development would forgo a large portion of its profits making it far less likely to go ahead. This then raises the question of who would ultimately bear the cost of ensuring oil and gas companies comply with this obligation.
What might start as getting oil and gas companies to fund the development of carbon storage through a CTBO, could end up costing the Exchequer. For example, if companies are able to deduct those compliance costs against ring fenced corporation tax, or if the Government then reforms the tax regime to encourage investment. Oil and gas companies once again avoid paying up, with the Exchequer footing the bill through foregone tax receipts.
Ultimately, every feature that would hypothetically make a carbon takeback obligation effective - a high obligation or applying it to existing production - is a feature that makes it harder to implement. What would remain is a version that can be passed because it asks and delivers very little.
Why the Government should reject a CTBO and what we need instead
It is right that we should be holding producers responsible for the impacts of what they sell, but applying a CTBO to Rosebank, Jackdaw or any other field is a false solution which only seeks to extend the oil and gas industry’s social licence to operate.
Where we need to be holding producers accountable is in supporting workers with transferable skills to transition into jobs in the rapidly growing renewables sector. In just two years the number of direct and indirect jobs in offshore wind has grown by around 25%, from around 32,000 in 2023 to around 40,000 in 2025. Laser focus on building out a genuine domestic wind manufacturing base – alongside concrete measures to help oil and gas workers into alternative jobs, such as the skills passport and the North Sea Jobs Service – is the only way to protect workers long-term.
Instead of handing the oil and gas industry a get-out-of-jail-free card, this Government needs to focus on delivering a fair and rapid transition to renewable energy. We need an ambitious policy programme, tailored towards supporting energy workers and local communities – not preserving the status quo for the oil and gas industry.
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