Osborne’s Oil Bonanza
Fossil fuel subsidies are a really bad idea: they increase the risks of climate change, keep economies hooked on oil and gas, give unneeded strength to the arm of some of the world’s biggest, dirtiest corporations, and make it harder for clean energy to break through.
But Chancellor Osborne apparently doesn’t just think tax breaks for polluters is a good idea – he has provided the best part of £1 billion worth of tax breaks to oil and gas producers in the last ten months alone
New research from Friends of the Earth quantifies by how much the Chancellor’s tax breaks for oil and gas production, called “field allowances”, have been massively ramped up since Budget 2012.
Field allowances do two things – either encourage oil and gas plant that is reaching the end of its life to keep on wringing out the last drops, or to improve the marginal economics of new, tricky or deep water fields (for example off the coast of Shetland) that the market would not ordinarily want to touch. They are direct intervention in the economics of fossil fuel production, and work by reducing the amount of tax that that certain types of field have to pay. Without them, a huge stash of oil and gas would stay in the ground.
Osborne didn’t invent field allowances – Alistair Darling did, back in 2009. But they were relatively small fry until George got his hands on them. Over the course of 2012 Osborne has expanded existing allowances and created new ones. Fossil fuel producers have lapped them up, and no wonder: assuming all are claimed in full, which is probable, the industry will have bagged themselves £864 million just over the last ten months, and that figure is set to increase further.
The wrenching of oil and gas – which would probably otherwise have stayed in the ground – has increased as a result, with carbon consequences. Tax breaks work. I calculated that the oil and gas set to be extracted as a result of a different tax measure (certainty over tax payments for decommissioning old rigs) would produce as much CO2 as the UK emits in a year.
The standard response to this stuff – the oil and gas industry remains highly taxed – is increasingly shaky. Since Budget 2012, 40 new fields have been licensed, of which 32 (that’s 80%) could pay as little as 30% tax on profits. And of course these tax breaks are in addition to the massive subsidy the fossil fuel industry gets by not having to pay the full costs of the economic, social and environmental damage it causes through air pollution, climate change and oil spills.
Just a few days ago the President of the World Bank – no tree hugger – slammed fossil fuel subsidies. The OECD has also repeatedly done so, as has the International Energy Agency – its chief economist, Fatih Birol, saying that fossil fuel subsidies are the ruptured appendix of our energy system (read the full article here).
With the anti-green Chancellor mulling over tax breaks for shale gas producers – a decision due for Budget 2013 – this slavering pursuit of fossil fuels has to stop. Our economy, future- proof energy system and the climate all demand it. Instead, all weapons in the Chancellor’s arsenal should be turned towards supporting new, renewable energy technologies fit for tomorrow – as well as using the cash he gets in in carbon taxes to insulate the nation’s leaky homes, so we don’t need to use so much energy in the first place. To show your support please sign the petition at: www.energybillrevolution.org.