As the government announced a windfall tax after another u-turn, it has emerged that in the long term it could be very harmful in the battle against climate change.
On Thursday the Chancellor announced a £15 billion support package for households around the country to offset some of the rising energy bills.
At the same time he said that the Government would try to raise £5 billion by slapping an extra 25% on the tax that North Sea oil producers pay to HM Revenue and Customs.
However, came with a promise that the firms can claim heavy tax relief if they invest in the UK, but only for investments in oil and gas.
Encouraging more investment in North Sea oil and gas extraction, while not doing the same for decarbonisation plans is a very controversial move as you can see from these comments.
Shell
Even oil giant Shell has questioned the Government’s decision not to allow its green investment to count towards the tax relief it will get from the new windfall tax.
Activists hit out at the tax’s relief system, which encourages new investment to extract more oil and gas from the North Sea.
It does not incentivise investment in renewable energy.
Shell had originally seemed to welcome the new system after it was announced on Thursday.
It said that a tax relief that could give it 91p back for every £1 it invested in the UK was “a critical principle in the new levy.”
This decision was criticised by environmental campaigners.
Shell said: “We understand the worry for millions of people about how high energy costs are challenging their household budgets – and the need for support to help make ends meet.
“But at the same time, we must sustain investment in securing supplies of oil and gas the UK needs today, while allocating future spend for the low-carbon energies we want to build for the future.”
Mark Ruskell, a member of the Scottish parliament for the Scottish Greens, said it “seems that rather than making fossil fuel companies pay their fair share, the public purse will actually be subsidising this climate-wrecking investment to the tune of almost £6bn. This is obscene.”
He added: “The truth is that big oil and gas companies will take this as a green light from government to double down on extraction, without a thought for the climate,” reports The Independent.
Related: Best reactions to windfall tax u-turn but calling it a profits levy instead