Windfall tax: Rishi Sunak levy on oil and gas firms breaks key COP26 climate pledge to phase out fossil fuels
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Chancellor Rishi Sunak has announced that a 25% windfall tax will be introduced on profits of oil and gas companies, as part of a package of measures to help those struggling amid the cost of living crisis.
However, the move allows energy firms to avoid paying a higher percentage of the levy if they invest more in the sector.
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Hide AdOne of the ways they can do that is by extracting more fossil fuels.
This runs in direct conflict to the COP26 agreement which pledged to phase-out the use of inefficient fossil fuel subsidies.
Climate campaigners said the tax will only increase the UK’s dependence on fossil fuels instead of supporting a switch to green energy.
Reactions to windfall tax breaking COP26 pledges
Ami McCarthy, political campaigner for Greenpeace UK, said the windfall tax is “utter stupidity.”
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Hide AdShe said: “Rewarding oil and gas extraction, while doing nothing to encourage investment in renewables will not provide energy security, push bills even higher and pour fuel all over the climate crisis.
“Sunak should have used this moment to genuinely tackle the cost of living crisis both in the short and long term, by providing support to households feeling the squeeze and investing in clean energy and home upgrades that would reduce energy use and keep bills down.”
She added: “The Chancellor is either in the pocket of the oil and gas industry or is simply happy to see the world burn.”
Proactive Investors reported Russ Mould, investment director at AJ Bell, said the UK’s energy policy appears “confused.”
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Hide AdHe said: “In the run-up to COP26, the Government was understandably beating the renewables drum and it even blocked the development of a gas field in the North Sea by Shell.
"In its wake, it has cut air travel duty for domestic flights, cut fuel taxes to effectively subsidise car travel and now used the windfall tax to fund further fuel consumption.”
What do campaigners want to see instead to help the cost of living crisis?
Climate campaign group GreenPeace wants the Chancellor to tax offshore oil and gas companies at 70%, in line with the global average.
At the moment the UK currently taxes fossil fuel firms at 40%.
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Hide AdMs McCarthy said: “While providing support to millions struggling with sky-high energy bills is 100% the right thing to do, by only skimming the top 25% off oil and gas company profits Sunak has missed a huge opportunity to tackle the root cause of the cost of living crisis and the climate crisis together.”
She added: “Taxing the full profits at 70% would have more than doubled the cash available.
“This could have been used to provide short-term relief to households, as well as upgrades to homes to ensure they use and waste less energy, and keep bills low for years to come.”
Ms McCarthy said “fossil fuels are driving the climate crisis and the cost of living crisis” yet the proposal of the windfall tax “only does half a job.”
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Hide AdFriends of the Earth climate campaigner, Sana Yusuf, said that more importance needs to be placed on poorly insulated homes to keep energy bills down.
She said the package “misses the opportunity to invest in a free, street-by-street insulation programme, targeting those most in need first, which would reduce bills”.
Ms Yusuf added: “These measures are a sticking plaster solution that fails to tackle one of the root causes of soaring heating costs – the UK’s poorly insulated homes.”
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