EVENTS in Europe have highlighted the complications the Scottish Government could face in delivering on its plan to secure a just transition to a low carbon energy system as oil and gas firms underline the potential of the North Sea.

A furore involving the Danish government has provided food for thought for the SNP administration as it enters the final stages of the consultation period on the energy strategy which it published in January following long delays.

The strategy targets a massive expansion in renewable energy generation in Scotland, which it is promised will secure a huge reduction in emissions while creating more than 50,000 green jobs.

The Scottish Government reckons these will offset the impact of the decline in oil and gas activity that it reckons is inevitable. The draft Energy Strategy says there should be a presumption against new oil and gas exploration off Scotland on environmental grounds.

But sceptics note that hopes of a green jobs bonanza in Scotland have been cruelly disappointed so far. There are concerns that the bulk of the benefits of windfarm activity in Scotland have been enjoyed by investors and corporations based outside the country.

The Scottish Government insists the ScotWind offshore licensing round completed in 2021 will pave the way to a bright future, by delivering a huge increase in generating capacity and a multi-billion pound boost to supply chain activity in Scotland.

However, the Danish affair provides a reminder of the ability that the EU has to pose challenges for countries that are embracing the green revolution. It has used this since the Brexit vote to cause embarrassment for the UK Government with implications for Scotland.

Denmark found itself in the spotlight earlier this month after announcing that it had shelved a licensing process covering windfarms in the Danish North Sea because of concerns it would fall foul of EU restrictions on state aid. “It is a serious situation for the green transition and especially for the market players who are ready to invest in this form of offshore wind,” said Minister of Climate, Energy and Utilities Lars Aagard of the decision.

Wind industry leaders described the move as absurd but it spoke volumes about the power of the EU to make like difficult for member countries in the area of state aid, as it seeks to remove barriers to competition.

It is a cause of concern for the Scottish Government following Nicola Sturgeon’s decision to stand down as First Minister after eight years in charge.

Ms Sturgeon made attachment to Europe a core part of SNP ideology as she claimed the Brexit vote took Scotland out of the EU against its will. Contenders to succeed her have not questioned that approach.

This is despite the fact that restrictions imposed by the EU hampered the Scottish Government’s efforts to support the renewables supply chain before Brexit. After being accused of not doing enough to support the Burntisland Fabrications business before it went into administration, the Scottish Government cited limits on state aid imposed by the EU.

While Boris Johnson claimed to have got Brexit done, the EU has shown it can still hamper efforts to support the domestic supply chain in the UK by resorting to World Trade Organisation (WTO) rules.

The UK Government set out to revamp the Contracts for Difference (CfD) subsidy regime that was developed to encourage firms to invest in windfarms, as it sought to require developers to use domestic suppliers.

However, the European Commission argued that the proposed reforms to the programme could disadvantage firms in member states.

After the commission threatened to launch an action at the WTO the UK Government backed down in a way that made Boris Johnson’s bluster about taking back control ring hollow.

In an agreement with the commission announced in July the then trade minister, Anne-Marie Trevelyan, conceded commitments that the Government proposed developers should make would effectively be meaningless.

The Government said that in a letter to trade commissioner Valdis Dombrovskis, Ms Trevelyan clarified that, under the CfD scheme, any data requested from potential beneficiaries about the level of UK content in their projects is used for information purposes only.

“CfD beneficiaries do not need to achieve any particular level of UK content to receive payments, nor are they bound by the envisaged level of UK content they indicated when first applying to the CfD scheme. CfD beneficiaries can choose their suppliers regardless of the supplier’s UK or non-UK origin,” it said. The about turn may have significant implications for Scotland amid expectations the ScotWind licensing exercise could be used to ensure suppliers in the country benefit from windfarm activity.

Applicants were required to submit supply chain development statements. Many made big claims about the impact their programmes would have.

However, there are big questions about how local content requirements could be made to stick.

Following Ms Trevelyan’s concessions, any effort to use the subsidy regime to enforce them would likely come under attack.

The EU recently opened a new front in its state aid campaign in a way that could cause particular concern in the camp of SNP leadership contender Kate Forbes.

As finance secretary in Ms Sturgeon’s administration, Ms Forbes is said to have played a key role in securing the agreement with Westminster under which the Scottish Government launched its Green Freeports programme.

It is hoped the ports concerned will become major manufacturing and logistics hubs that will support the development of renewables infrastructure.

In January it was announced that the first two will be developed on the Forth and the Cromarty Firth, to the dismay of champions of schemes centred on Clydeside and Aberdeen.

Deputy first minister John Swinney said the first freeports would support businesses to create high-quality, well-paid new jobs and make a significant contribution to achieving Scotland’s net zero ambitions.

The Scottish Government noted the two winning bids will be supported by up to £52 million in start-up funding and will benefit from tax reliefs and other incentives “through a combination of devolved and reserved powers”.

However, an official minute of a meeting between UK and EU officials that was updated on February 10 indicates that problems may lie ahead.

It states:

“The EU sought clarifications on the measures announced under the UK Freeports policy and expressed concerns about the possible effects of these measures on trade or investment for the Union. The EU raised a number of questions on the measures, notably on any potential effect on trade or investment for the Union of the subsidy measures.”

Against that backdrop it may be unwise to expect the Scottish Government to achieve its Green Freeports ambitions any time soon.

But amid the uncertainty about the outlook for renewables jobs oil and gas firms are showing confidence in the North Sea as they look to capitalise on the rise in commodity prices fuelled by Russia’s war on Ukraine.

While the Chancellor angered industry leaders in November by increasing the rate of the windfall tax charged on the profits firms make from production, the impact will be offset by a generous tax allowance in respect of investment in new projects.

In a trading update issued earlier this month, North Sea heavyweight EnQuest announced that it had deferred a well on the Kraken heavy oil field following the tax hike but planned to go ahead with six others that will underpin production from the Magnus and Golden Eagle fields.

The company generated a record $500m cash from its operations last year.