From the TUC

Time to tax Elgin’s CO2 leakage

28 Mar 2012, by in Economics, Environment, International

Each day, 400 tonnes of carbon dioxide (CO2) are escaping free to air from the Total Elgin gas  leak in the North Sea.  There’s no carbon tax to be paid on Total’s gas leak, no charge for adding to the UK’s carbon emissions, or reduction in the company’s overall “carbon allowance”. Total claims that the leakage rate is  200,000 cubic metres a day. A cubic meter of  natural gas generates 1.9 kilos of carbon dioxide, so the daily rate is just under 400 tonnes CO2. Total is reported that it did not yet know the capacity of the leaking reservoir, but in a “dream” scenario it could simply “run itself out”. Just like leaving your engine running, then.

Last week George Osborne told MPs in his Budget speech that: “Gas is cheap, has much less carbon than coal and will be the largest single source of our electricity in the coming years.” But escapes from gas fields – or oil pipelines – don’t carry a carbon tax penalty. The EU’s emissions trading scheme (ETS) regulates the combustion and processing of fossil fuels, not leakages on any scale. The leak could run for six months, by which time some 70,000 tonnes of CO2 will have been emitted to air.

Consumers are already pay a price. DECC says production from Elgin and the connected Franklin site, which has also been shut, account for about 3% of the UK’s gas supply. So far, the leakage has prompted a 1.5% rise in wholesale gas prices. It’s the most serious incident in the North Sea since Piper Alpha. RMT offshore organiser Jake Molloy commented that Total had acted very swiftly in getting everyone off but the potential still exists for catastrophic devastation if the gas cloud ignites.

The chancellor prompted a new “dash for gas” in the Budget.  The energy secretary will set out a new gas generation strategy in the autumn.

Meanwhile, there’s the matter of good environmental stewardship of increasingly scarce resources. A sheen on the water is present near the platform, estimated to extend over 1.85 square miles and measure between two and 20 tonnes in volume. There’s a commercial penalty for mismanagement. On Tuesday, Total’s shares fell 6pc in Paris, wiping more than €5.5bn (£4.6bn) off the company’s value and analysts said a worst-case scenario could see costs for Total running to billions of dollars. An Investec analysis says a relief well could cost $50m, but in a worst-case scenario, multi-billions of dollars”.

Climate change is driven by the accumulation in the atmosphere of greenhouse gases that trap the sun’s heat. In February 2005, the Exeter international conference on climate change learnt from one leading scientist that developed countries were using the atmosphere as an “unpriced waste dump.” Time to tax carbon leakage.

TUC