A tax break for investment in oil and gas production worth up to £5.7 billion could have insulated two million homes, a think tank has said.
The support, part of the emergency cost-of-living package unveiled last week, could have been used instead to “supercharge” an energy efficiency drive that saved each of the homes £342 on their bills, climate think tank E3G said.
The Government performed a major U-turn last week when Chancellor Rishi Sunak announced he will bring in a windfall tax on the soaring profits of oil and gas companies that will raise an estimated £5 billion.
But companies can also avoid almost all their tax bill after Mr Sunak doubled the relief they can get for investing in new oil and gas extraction, raising it to 91p for every £1 they invest in the UK.
New tax relief on oil and gas investment gives companies handouts for undermining our climate safetyEuan Graham, E3G
The relief for investment only applies to oil and gas production – not renewables – prompting criticism from environmental groups that more oil will flow from the North Sea as a result.
The International Energy Agency has previously warned that no new oil and gas projects can go ahead if the world is to limit temperature rises to 1.5C to avoid the worst impacts of climate change.
Climate and fuel poverty campaigners want to see investment in insulation and other energy-saving measures – missing from last week’s support package – to permanently cut the bills people face from living in heat-leaking homes as well as reduce the amount of greenhouse gas emissions produced.
Research by E3G warns that, by introducing additional tax relief limited to oil an gas investment, the Treasury is incentivising a slower transition away from fossil fuels and pushing companies to invest in new oil and gas instead of renewables – with new fields likely to go ahead.
The think tank says the measures amount to a subsidy of up to £5.7 billion over three years.
That “lost revenue” could have been used to insulate two million homes over the same period, saving households an average of £342 on their bills every year, E3G argues.
The only long-term solution to fuel poverty is improving the energy efficiency of our homesSimon Francis, End Fuel Poverty Coalition
Euan Graham, senior researcher at E3G, said: “New tax relief on oil and gas investment gives companies handouts for undermining our climate safety.
“The Government could have used this ‘lost revenue’ to supercharge an energy efficiency drive that brings household bills down once and for all.
“Instead, it pushes for profits to be spent on new oil and gas projects. This is the opposite of what’s needed if we want to end our reliance on expensive gas.”
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “The only long-term solution to fuel poverty is improving the energy efficiency of our homes and a move towards a renewable led secure energy supply.
“Sadly, recent government announcements have been neutral on energy efficiency and this research shows they are now in reverse gear on a just transition away from fossil fuels.”