On the 2nd of May, the day after the long-awaited Sue Gray “partygate” report went public, the Chancellor of the Exchequer announced a 25% windfall tax on the record profits of oil and gas companies. This was a U-turn move for the government who are expected to earn £5 billion from this levy, which will be used to help people with the cost of living crisis.
However, in the same breath - and despite the government’s COP26 pledge to phase-out inefficient fossil-fuel subsidies - the Chancellor announced that there would be a 91% tax relief for new oil and gas investments. This loophole for oil and gas producers is bad news for the climate and bad news for the many people struggling with the cost of living, who will likely see a repeat of the energy bills crisis come winter.
A report by the International Energy Agency (IEA) found that there is no space for any more fossil fuel production if we are to meet the goal, set out in the Paris Agreement, of limiting global warming to 1.5C above pre-industrial levels. However, a tax relief of this proportion incentivises the acceleration of new oil and gas projects in the pipeline. When announcing his Energy Security Strategy, Secretary of State, Kwasi Kwarteng, pushed the flawed message that investment in domestic oil and gas was necessary for a secure energy supply to the UK that is not reliant on Russian gas imports. However, 75% of what is left in the North Sea Basin is oil and, since the UK exports 80% of its oil, the public is unlikely to see any benefit from these developments.
Using public reporting and data from Rystad Energy, new research from Uplift shows that between 33 and 39 new projects could be subject to the investment allowance between 2022 and 2025. The potential emissions from these new projects are estimated to be between 625 and 899 million tonnes of CO2e; between one and half and two times the UK’s total annual emissions.
This pipeline includes 3 projects currently awaiting a decision from the regulator and Kwasi Kwarteng. These are BP’s Alwyn East and Murlach fields, Habour Energy’s Talbot field and the controversial – paused - Cambo development.
