THE UK Government’s move to increase the windfall tax on oil and gas companies "makes little difference" when it comes to accelerating the transition to net-zero, according to climate campaigners.
The tax was first introduced in May in response to the bloated profits of fossil fuels giants such as BP and Shell, who had benefited from the high price of oil and gas in the aftermath of Covid lockdowns and Russia’s invasion of Ukraine.
In August, BP reported its largest quarterly profit for 14 years. Between April and June, the British company reported profits of £6.9 billion.
It then made a further £7.1 billion between July and September, which resulted in calls for an increase to the windfall tax – including from the Scottish Government.
The initial windfall tax constituted an additional 25% tax on all UK oil and gas profits on top of the 40% headline rate already in place.
However, following Chancellor Jeremy Hunt’s Budget this additional tax has now been increased to 35%.
But climate change campaigners say that a loophole that provides tax breaks to companies seeking to invest in new oil and gas projects all but nullifies the benefits of an increased windfall tax.
Freya Aitchison, an oil and gas campaigner for Friends of the Earth Scotland, told The National: "When the Windfall Tax was introduced earlier this year, it included a deliberate loophole which gives a massive tax break to fossil fuel companies for investing in new oil and gas developments.
“This directly incentivises companies to drill for more climate-wrecking oil and gas, increasing their already record-breaking profits while taking away from the funding that could have helped people with their skyrocketing energy bills.”
She added: “The fact that this loophole remains means that the small increase in the windfall tax will make little difference. For example, Equinor, the company that wants to drill the massive Rosebank oil field off the coast of Shetland, will receive over £100 million in subsidy from the UK public in order to develop the field.
Instead of closing the loophole in the #windfalltax, @Jeremy_Hunt has now actively widened it. Outrageous to increase spending cuts and tax on workers, yet give £500 million pounds to Equinor if it goes ahead with #Rosebank (and more if they power their drilling with renewables)— #StopRosebank (@StopCambo) November 17, 2022
“Any money invested in fossil fuels now is money that is not being spent on a just transition to clean, reliable renewable energy. The UK Government must close the investment allowance loophole now and stop all new oil and gas developments.”
It comes as campaigners protested outside the North Sea Transition Authority buildings in London, calling on the UK Government not to approve the Rosebank oil field.
If given the green light, campaigners say the field – located 130km off the coast of Shetland – would produce the same amount of fossil fuel pollution as the 28 lowest-income countries combined over its lifetime.
A spokesperson for Uplift UK, who support members of the Stop Rosebank campaign, told The National: "If the regulator gives Rosebank the green light, not only will it add fuel to the fire during a climate emergency but – thanks to the gaping loophole in the windfall tax that the Chancellor not only kept but also widened in his Autumn Statement – it will see over half a billion pounds of taxpayers money, in effect, handed to Rosebank's developers during a monumental cost-of-living crisis.
“The Government’s point blank refusal to reverse this subsidy for the oil and gas industry in the face of an appalling drop in living standards where 7 million people are unable to heat their homes is unconscionable. The British public deserve better."
The UK Government insists that it does not give subsidies to fossil fuel companies. However, the tax relief it provides on investments in new oil and gas fields of 91% meets the international definition of a subsidy.
Last week, Norway’s state-owned energy company Equinor – who are funding the development of the Rosebank field – announced that it was postponing an investment decision in a major oil field in the Arctic until 2026.
Climate campaigners celebrated the decision and said the continual pressure from activists helped put a stop to the project.