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Daily Telegraph: UK ‘squandered’ North Sea revenues

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(The think tank nef calls for a windfall tax on the profits of oil companies such as Shell and BP)

By Tom Stevenson Last Updated: 1:25am BST 23/10/2006

A leading think tank has called for a windfall tax on oil companies’ profits, warning that Britain has squandered billions of pounds of North Sea revenues.

The New Economics Foundation (nef) said the UK should follow the example of Norway, which had used its “accidental inheritance” to set up a Petroleum Fund worth $210bn at the end of 2005, equivalent to $45,000 for every person living in Norway. Nef’s call comes as both BP and Royal Dutch Shell prepare to unveil third quarter results this week.
 
Andrew Simms, policy director at Nef said: “Britain has squandered its windfall of natural resources from North Sea oil and gas. Instead of prudently investing the unearned income from nature to build a safe, clean and green energy supply for the nation, we face unnecessary shortages.”

The report said £1 in every £12 of government income comes from the oil and gas sector and questioned whether the Treasury faced a “powerful short-term disincentive to kick the fossil fuel habit”.

Mr Simms said applying the government’s own estimations of the social and environmental cost of carbon emissions to BP and Shell’s operations and products would result in a total bill of £46.5bn, almost twice the companies’ combined annual profits of £25bn.

The nef study is released as the government prepares to publish a ground-breaking report on the economics of climate change from Sir Nicholas Stern, a former chief economist at the World Bank.

advertisementCommissioned by the Chancellor, Gordon Brown, last year, Sir Nicholas is expected to conclude that slashing greenhouse gas emissions will be far cheaper than dealing with the devastation that would be caused by allowing global warming to continue unchecked.

A report from PricewaterhouseCoopers recently suggested that a 60pc reduction in carbon emissions by 2050 could be achieved at a cost of just one year’s GDP.

With both opposition parties attempting to outflank Labour on green issues, the government is under pressure to regain the initiative on the environment.

As an economist, Sir Nicholas Stern is thought to favour market solutions such as building more of the cost of pollution into the price of oil and gas products.

The report says that the high cost of oil makes consumption taxes too difficult. Instead, Simms added, ‘a windfall tax could establish an Oil Legacy Fund to pay for Britain’s urgent transition to a sustainable, decentralised energy system.’

The report suggested that a fund could be used to help develop small renewable energy technologies and to make energy monitoring devices available to increase awareness of current energy use.

www.neweconomics.org

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/10/23/cnoiltax23.xml

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