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.
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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.
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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.
18 Responses to “Osborne’s carbon footprint grows as Shell decides against wind power”
mel starrs
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Marquis Le Dain
Who is pulling Osborne's strings http://t.co/nuuBHaw1 If the Law is broken, and the Police fail to intervene. Then the people must act!