Billions of pounds spent on a tax cut for UK oil and gas exploitation could have permanently reduced the energy bills of 2 million homes by £ 342 a year if invested in ‘isolation, according to a green think tank.
Rishi Sunak last week announced a 91% tax cut along with an extraordinary tax on the huge profits of oil and gas companies. The think tank E3G estimated that the tax cut would return £ 2.5 billion to £ 5.7 billion to oil companies over three years, while a £ 3 billion energy efficiency program over the same period would improve 2.1 million homes by -the least dependent on gas. .
Rising international gas prices are expected to more than double energy bills in a year in October, causing energy poverty in a third of households. Proponents of energy efficiency, including the insulation of attics and walls, say it is an unfortunate investment that reduces bills forever, reduces carbon emissions that drive the climate crisis, and increases jobs. Green groups said the chancellor’s subsidies to households funded in part by the unexpected tax were just a “sticky plaster.”
Another report released on Tuesday by the Tony Blair Institute for Global Change (TBI) found that an annual investment of £ 4bn in energy efficiency could halve permanent heating bills for homes. in 2035. Its author said Sunak was handing out “raincoats,” but “he didn’t.” fix the roof ”.
The tax cut is in line with official definitions of a fossil fuel subsidy, which the UK and other countries had promised to phase out. It encourages new oil and gas production, although a recent Guardian investigation found that the fossil fuel industry is already planning projects that would destroy the world’s chances of maintaining a livable climate.
E3G’s Euan Graham, who conducted the tax cut analysis, said: “[Sunak] is providing a subsidy to oil and gas producers that will hurt the energy transition in the long run. The government has not understood what it takes to provide a truly resilient and affordable energy system. Instead, it is willing to implement policies that support the interests of oil and gas companies rather than British households. “
Ministers argue that more oil and gas supplies from the UK would increase future energy security, but fuels are owned by companies and are mostly exported.
The tax cut has also been criticized by the Institute for Fiscal Studies (IFS). “[It means] an investment with massive losses could still be profitable after taxes. It’s hard to see why the government should offer such large tax subsidies and therefore encourage even economically unviable projects, ”Stuart Adam told IFS.
The E3G analysis used industry investment estimates and data from an insulation plan supported by companies and energy groups. Savings of £ 342 a year on upgraded homes are based on bills scheduled for October. The new tax cut meets the World Trade Organization and International Monetary Fund grant definitions, as well as a new UK legal definition.
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The TBI report calls for the creation of an independent “home energy service” that would provide each household with a simple and practical plan to reduce their bills and decarbonise, along with interest-free loans. He said a 10-year plan would save billers payers a total of £ 100bn compared to current prices and that similar approaches in Germany and Scotland are already reducing bills.
“Short-term support, like the measures announced last week, is significant, but spending a fraction of that amount a year [Sunak] “It could cut heating bills in two over the next decade and isolate the UK from future shocks,” Daniel Newport told TBI. “It’s currently distributing much-needed but very expensive raincoats. .
Sam Hall, director of the Conservative Environment Network, which has the backing of more than 100 Conservative MPs, said: “It was disappointing that the chancellor did not announce new measures to help people improve the nearly 19 million homes isolated in the United Kingdom “. A Green House grant plan for England was ruled out in March 2021 and Parliament’s public accounts committee judged it a “failure” after improving only about 47,500 homes out of the 600,000 initially planned .
The Department of Business, Energy and Industrial Strategy was contacted for comment.