The United Kingdom and Norway present a useful comparison of how advanced economies manage energy policy alongside environmental objectives. Both are mature North Sea producers facing declining oil and gas resources, ambitious climate targets and the challenge of transitioning workforces. Yet their policy approaches, and the outcomes they generate, differ significantly in practice.

The UK energy transition: declining production and systemic constraints

UK oil and gas production is now firmly in structural decline. In 2024, oil output fell by 8.9% to 31m tonnes, while gas production fell 10% from 2023. While the UK basin is mature, the marked decline in UK production reflects government policy choices aimed at delivering net zero commitments and addressing cost of living pressures.

While UK demand for oil, gas and refined products has also dropped significantly from 1990s peaks, production has fallen much faster, leaving the UK dependent on imports to meet demand, particularly and increasingly from Norway and the United States.

UK government receipts from oil and gas fell by more than 25% to £4.9bn in 2024-25, and the Office for Budget Responsibility (OBR) forecast a further decline to £2.7bn in 2025-26. This forecast predated the oil and gas price spike caused by the blockage of the Strait of Hormuz.

The UK has led on wind development projects, and is currently second in the world by capacity, surpassed only by China. Capacity is steadily increasing with projects like Dogger Bank coming online and the success of the seventh Allocation Round (AR7), which awarded 8.4 GW. The success of these investments in transitioning the UK toward domestic energy will depend on significant investment in grid infrastructure.

The UK’s environmental strategy is focused on constraining domestic fossil fuel production while accelerating renewables deployment. There remain significant infrastructure challenges with this approach. The UK has a wind heavy grid that relies on gas, interconnectors and short term storage for balance. While the UK has universal electricity coverage, its grid was designed for gas based homes, making grid capacity one of the UK’s main challenges.

This has resulted in:

• Additional costs due to curtailment
• EV connection delays
• Heat pump limits
• Reinforcement queues.

Grid capacity is therefore a constraint on the pace of the domestic energy transition. In addition, consumer side decarbonisation has lagged: heat pump and EV sales, while growing, remain far below levels required to meet 2030 targets, and uptake is weak relative to Northern European peers.

Norway energy transition: production for export and systemic abundance

Norway, by contrast, has combined support for petroleum production with long term fiscal and environmental planning. In 2025, Norway produced 239m standard cubic metres of oil equivalent, around 10% below its historic peak. Crucially, this production underpins very large public revenues: the state’s net cash flow from petroleum activities was estimated at NOK 664bn in 2025.

Norway’s policy framework explicitly treats oil and gas as a transitional asset, using taxation, direct state participation and dividends to fund future oriented investment rather than current consumption. Norway produces more oil and gas than it consumes domestically, ensuring strong domestic energy security, and exports its surplus, providing a relatively low-emission, low-conflict source of supply compared with many global producers.

The oil and gas sector is the largest sector in the Norwegian economy in terms of value added, government revenues, investments and export value. In 2026, its share of GDP is expected to be 17.1%. As the world transitions from oil and gas, Norway will face challenges in replacing this industry. However, in the short term, job stability and investment remain high.

In addition to oil and gas, Norway has a hydro-based grid that can store and flex for months. Because of its long relationship with hydropower, Norway’s grid was built for electrified living. Norwegian domestic decarbonisation has also been more aggressive.

However, grid constraints are becoming increasingly prominent. Norway is a long and sparsely populated country, where a relatively small population is distributed across a large geographic area, making network development both costly and complex.

In April 2026, the state-owned transmission system operator Statnett introduced a temporary halt on the reservation of grid capacity for large industrial projects in Northern Norway. Pressure on grid capacity is also being intensified by Norway’s policy commitment to electrifying the continental shelf.

While wind projects are being developed, Norway has not invested at scale in domestic wind, potentially due to its abundant hydropower. The latest competition for state support, amounting to NOK 35bn, relates to a floating offshore wind project at Utsira Nord, with an estimated capacity of up to 1.5 GW. Notably, only two applications were submitted for the project area. The majority state-owned energy company Equinor is now focused domestically and internationally on material offshore wind clusters in the UK, Norway, the US North East and the Baltic Sea. Equinor has said “The next phase in the global transition to low carbon and renewable energy is happening now, with offshore wind at the centre of the revolution.”

Pace of energy transition: UK vs Norway

Electric vehicles have been common in Norway for decades and currently make up about 32% of passenger cars. EVs in the UK make up around 5 to 6% of passenger cars and this is expected to rise quickly, with electric or hybrid vehicles accounting for more than 50% of new UK registrations in March 2026. Norway has, however, retained a high share of diesel cars, at around 30% compared to just 5% in the UK.

Heat pumps are also deeply embedded in Norwegian homes, with over 600 installations per 1,000 households compared with fewer than 20 per 1,000 in the UK.

The UK has achieved faster absolute emissions reductions, with territorial greenhouse gas emissions falling by 53% from 1990 levels by 2024. Norway’s emissions, by contrast, have reduced more slowly, reflecting continued production that largely serves export markets.

While transitioning both countries have a sustained need for oil and gas. From a strict carbon footprint perspective, considering production, refining and transportation emissions, Norwegian oil and gas is a clear leader with the lowest embedded emissions. This low carbon footprint is largely due to pipeline connections with the UK, strict Norwegian policies on flaring and methane emissions, and the electrification of most oilfields.

UK domestic production has slightly higher embedded emissions but is a good second choice from a carbon perspective. Imports from the rest of the world are significantly higher in embedded emissions.

This has led many to question whether constraining UK domestic oil and gas supply, given the associated impacts on energy security, energy costs, fiscal receipts and jobs, makes environmental sense if demand is instead met by higher carbon imports.

Business impacts of energy transition

Norway’s domestic energy system is inherently low carbon and stable, while the UK’s is cleaner than before but structurally more volatile due to limited storage and reliance on imports. While there can be an academic debate about which national model is more environmentally ‘correct’, the implications for UK businesses are no longer theoretical, but operational, financial and strategic realities.

While many have called for changes in UK policy to provide energy security, protect jobs and support transition, the UK government has held firm, and no change in policy is anticipated prior to a change in government in 2029.

Three realities now define the UK landscape:

• Energy volatility is structural, not cyclical. Businesses should assume that energy costs will remain uncertain, regionally uneven and exposed to geopolitical shocks. They should forecast the impact of price fluctuations and consider routes to manage these changes. Beyond that, energy availability could become uncertain, and businesses should consider how this can be managed proactively.
• The transition is constrained by demand, not ambition. UK policy has moved faster on supply restriction than on consumer-side decarbonisation and infrastructure readiness. Grid reinforcement delays, connection queues and local capacity constraints mean that even well-capitalised investments in electrification, EV fleets or heat technologies can stall for years without early planning. Decarbonisation is therefore a sequencing and delivery challenge. Effective planning and collaboration can create opportunities and deliver strategic advantage.
• Businesses within the energy sector, even relatively small firms, are deploying internationally, diversifying beyond the UK and following investment opportunities overseas. This has provided many businesses, particularly in the oilfield and renewables space, with access to profitable international opportunities while the UK market remains uncertain. International expansion comes with legal, compliance and practical challenges. Early support can help businesses manage these obligations and inform tender pricing by better understanding the full cost of projects upfront.

How we can help your business

We have extensive experience in the energy and natural resources industry, working with clients in the UK, Norway and globally in sectors spanning oil and gas, renewables and cleantech and mining and metals.

To discuss the impact of energy transition on your operations, please get in touch with Grant Morrison or your usual RSM contact, who can connect you with our international network, including our team in Norway.

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