The UK’s windfall tax on oil and gas profits must be changed to raise billions more and to stop companies using loopholes to invest in further fossil fuel extraction, the outgoing president of global climate talks has said.
“These are excessive profits, and they have to be treated in the appropriate way when it comes to taxation,” said Alok Sharma, the president of the Cop26 UN climate summit. “We ought to be going further and seeing what more can be done in terms of raising additional finance [from the profits]. So far, at least, the level of money raised is obviously not significant.”
The UK is facing a cost of living crisis and the Treasury needs to fill an estimated £50bn hole in the country’s finances.
Shell admitted this week it had paid no windfall tax despite having made a record $30bn in profits for the year so far.
The oil company said it had taken advantage of a loophole exempting companies that invest their surplus in increasing oil and gas extraction. On Friday, the US fossil fuel firm ExxonMobil reported a quarterly profit of nearly $20bn, $4bn more than forecast.
Sharma said: “There really is an incentive for these companies to do more in terms of oil and gas. What we want them to do, if we are to meet our target of 100% clean energy by 2035, is to accelerate the renewables rollout.”
He also said the UK’s push for more gas extraction – the government is licensing new drilling in the North Sea, and offering tax breaks for increased production from existing wells – was at odds with the legally binding commitment to reach net zero greenhouse gas emissions by 2050.
“The International Energy Agency has been clear that in terms of new fields, they don’t think that’s consistent with a 1.5C pathway, and the onus is on every government – including the UK – to explain how any policies they have on oil and gas, or any other policy, is consistent with their legally binding commitments.”
He said companies should be offered incentives to increase their investment in renewables rather than fossil fuels. “That is the way you get faster delivery of renewable energy across the UK,” he told the Guardian. “What we want to see is a big expansion in renewables.”
Sharma was praised around the world for his role in directing the Cop26 UN climate talks last November in Glasgow, where he forged a global pact to limit temperature rises to 1.5C above pre-industrial levels. His role as president of the talks ends next week, when the Cop27 summit begins in Egypt.
This week he was stripped of his cabinet position by Rishi Sunak, raising concerns among environmentalists about the incoming prime minister’s commitment to tackling the climate emergency.
Sharma and Graham Stuart, the climate minister, will keep their current roles but not attend cabinet, leaving the government for the first time in years without a cabinet minister focused on the climate crisis.
Downing Street said on Thursday that Sunak would not attend Cop27, in asnub to the Egyptian hosts and to the US president, Joe Biden, who will attend.
One developed country diplomat closely involved with the Cop27 talks told the Guardian: “It appears as if the new prime minister wants to wash his hands of the previously strong role the government played on international climate action. Plus, it’s another stab in the back for Sharma.”
Sharma, however, defended the prime minister. “Rishi Sunak has actually made a pretty good start on these issues. He has already ruled out fracking … and he said in response to a question at PMQs [prime minister’s questions] that we will deliver on what we said at Cop. The reason for that is that he obviously cares very deeply about passing on to our children an environment in a better state than we found ourselves. That is a really positive statement.”
Sunak’s predecessor, Liz Truss, in effect forbade King Charles from attending Cop27, which raised diplomatic protests around the world, as the king has been a major figure at previous Cops, including Glasgow and the 2015 summit that produced the landmark Paris climate agreement. Downing Street confirmed on Friday that the king would not attend, although Egypt’s foreign minister in charge of Cop27, Sameh Shoukry, told the Guardian the invitation was still open.