Shell scrapping its North Sea wind farm plans suggests George Osborne’s stimulus policies for the oil and gas industries are deterring investment in renewables.
.
Philip Pearson is a senior policy officer in the TUC’s economic and social affairs department
Two questions for Shell this week, as it pulls the plug on its North Sea wind projects, and perhaps one for the chancellor.
Firstly, with a 16% surge in three months profits to £4.5bn, why do companies like this need the coalition’s £3 billlion subsidy for oil and gas exploration off the Shetlands?
Secondly, is the company’s finance director right to criticise the ‘vast amount of public subsidies going into renewables’ when the government already subsidises fossil fuels by £3.63bn a year, mostly in the form of VAT breaks?
As the REA reported this week, that’s three times the support received by the renewables industry.
If “gas is cheap”, as George Osborne suggested in his budget speech, and it’s so obviously profitable, why does the oil industry need a £155m stimulus over the next two years to extract more of it?
Those in the renewables industry who feared that the new government subsidy for offshore oil and gas would deter investment in renewables have quickly been proven right.
• Cameron’s downgrading of environment policy bodes ill for the future 26 Apr 2012
• Clean energy summit will expose more coalition divisions 23 Apr 2012
• The new dash for gas is utter folly 20 Mar 2012
• Climate change sceptics and rural romantics – the Tories are a shambles on renewable energy 7 Feb 2012
• Britain is the world leader in wind power 21 Jan 2011
Shell has pulled out of investing in North Sea wind farms just five weeks after the tax breaks announced by the chancellor. Simon Henry, the company’s finance director, is reported as saying Shell ‘can’t make the numbers’ add up to justify building them. This contrasts with onshore turbines in America, where Shell controls almost 1 gigawatt of wind power.
Henry says the British government should support an industry that is “already successful”, such as oil and gas, rather than chase a renewable power sector that is “still trying to become profitable”.
As a table (Table 1 below; page 97, pdf) from HMRC shows, in the 2012 budget, Osborne announced a new £3bn ‘field allowance’ for particularly deep oil & gas fields with sizeable reserves, targeted at the West of Shetland, as part of the Government’s strategy to encourage further investment in the region.
Table 1:
Over the next five years to 2017, this will cost the Treasury a net revenue loss of £60m. As the impact assessment shows, the first two years of the scheme (2012-2014) involve £155m in tax reliefs to the industry.
Because the scheme is expected to stimulate investment, which in turn should generate revenues, the investment is then partially offset by revenues of £95m in the last three years to 2017. The Treasury expects these revenue flows to continue into the next spending review period, although no data is provided.
Oddly, the HMRC carbon impact assessment says just this:
“Oil and gas production installations produce carbon emissions.”
Light touch regulation from the Chancellor indeed.
To reach hundreds of thousands of new readers and to make the biggest impact we can in the next general election, we need to grow our donor base substantially.
That's why in 2024, we are seeking to generate 150 additional regular donors to support Left Foot Forward's work.
We still need another 124 people to donate to hit the target. You can help. Donate today.
18 Responses to “Osborne’s carbon footprint grows as Shell decides against wind power”
Dom Garman
Osborne's #dashforgas has instantly cost renewable investment as Shell cut investment for gas preference http://t.co/HERz5c6Z #fail
BevR
RT @leftfootfwd: Osborne’s carbon footprint grows as Shell decides against wind power http://t.co/ExUJbrLH
Anonymous
Funding offshore wind, which would have a massive ongoing need for funding to be commercially viable at all was never the answer, though.
And neither are massive boondoggles like the proposed, massively expensive power cable to iceland.
Steve1812
Oh do get a grip, the £3b subsidy to oil companies is nothing of the sort. As well as paying corporation tax, oil companies have to pay the Supplementary Charge, an extra tax hit simply because they’re oil companies. This levels the field with other parts of the energy sector. Also, the £3.63b of VAT breaks are also available to the renewables sector, since VAT is charged on electricity irrespective of source. Please get your facts straight!
Birmingham FOE
(2) Crazy the amount of double-talk over subsidies for energy. Renewables must be the future: http://t.co/2lik7HnZ #getcbe