Nearly two million tonnes of Co2 emissions could have been cut each year if the government had insulated homes rather than offering tax relief on fossil fuel extraction, a think tank has said.
Analysis previously reported by The Independent has suggested that Chancellor Rishi Sunak’s new tax relief on investment in oil and gas extraction in the UK will cost the taxpayer up to £5.7 billion in the next three years.
That money could have instead been used to insulate two million British homes over the same period, saving 1.8 million tonnes of Co2 emissions every year, according to think tank E3G. Insulation would also have reduced the average household bill by £342 a year, helping families cope with the cost of living crisis, according to the analysis.
Last week, the chancellor announced a series of measures to tackle soaring prices in Britain. They included a temporary 25 per cent windfall tax on the profits of oil and gas companies to help support struggling households.
In order to ensure that companies are not deterred from investment by the new levy, Mr Sunak announced that those that invest in oil and gas extraction would be entitled to hefty tax relief on that spending. The incentive means businesses will overall get a 91p tax saving for every £1 they invest in fossil fuel extraction.
The investment insentive was slammed by climate groups and opposition politicians who pointed out that climate scientists, the United Nations and the International Energy Agency have made it clear that the world needs to stop new investment in fossil fuels if it wants to avoid the worst impacts of climate change. They questioned why the government didn’t extend the incentive to include investment in renewables.
E3G said incentivising oil and gas investment encouraged a slow transition to renewables and pushed companies to allocate profits towards new oil and gas developments instead of renewable alternatives.
If that revenue had instead been spent on supporting energy efficiency measures, it would have the potential to lift households out of energy poverty for good, the think tank added.
Energy efficiency was absent from the chancellor’s emergency support package announcement, meaning UK households’ long-term reliance on gas will remain, it said.
The government has repeatedly defended its need to invest in the oil and gas sector arguing that North Sea oil and gas are crucial to the UK’s domestic energy supply and security for the foreseeable future.
A spokesperson for the government told The Independent last week that the tax break allowed for investment in activities to cut emissions, which could include electrification.
“In addition, there are already numerous generous incentives available to bolster investment in renewable energy, including the super-deduction, the UK’s competitive R&D tax relief regime and the Contracts for Difference scheme – making sure the UK continues to invest in clean energy too,” the spokesperson said.
