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Are oil companies up to their ‘old tricks’?


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May 2, 2008

Big oil must use price windfalls to go green

Are oil companies up to their “old tricks”?

Sir, European Union officials must be getting used to the familiar refrain they hear every time an industry sector is asked to cut carbon emissions. But when the latest industry to claim it will be “destroyed” by a flagship European climate policy also happens to be one of the richest and most influential, its arguments warrant a closer look.

Jeroen van der Veer, chief executive of Royal Dutch Shell, says that the proposed European Union scheme to force companies to pay for carbon emission permits — previously handed out free — threatens to destroy Europe’s petrochemical and refining industries. Mr van der Veer, whose company made a profit of $27.6 billion last year, thinks that the proposals would harm his “struggling” industry, causing jobs to leak outside the EU.

That doesn’t seem likely. The Carbon Trust has said: “The EU emissions trading scheme is unlikely to have much impact on the trade of oil products . . .

Harmonising free allocations could be complex and create perverse incentives. Avoiding free allocation altogether . . . would avoid these problems and the benefits of this requirement may outweigh any plausible international trade impacts.”

Depressingly, the oil industry is also trying to put the kibosh on another very important — but less well known — EU initiative. Article 7a of the proposed fuel quality directive says that carbon emissions from transport fuel production should be reduced by 10 per cent by 2020.

Europia, the industry lobby group, says the law should not apply to oil companies. It argues that biofuels are “the only option to reduce greenhouse gas emissions of road transport fuels”, implying that oil production is already squeaky green. Apparently (and worryingly) the oil majors have never heard of reducing flaring, improving refinery efficiency or cutting back on tar sand oil production, which is three times more carbon intensive than conventional oil production.

For several years the oil industry has been trying to convince the world that it is serious about going green. The sad reality is, they are up to all their old tricks.

Jos Dings
Director, European Federation for Transport & Environment

Sir, The price of oil continues to rise, causing pain and frustration to many thousands of businesses reliant on motorised transport. With the warning today from the Opec president that oil could reach $200 a barrel, it is now critical that the Government reconsiders its options regarding how it taxes commercial vehicles.

As the price of oil rises so too will the tax windfall collected by the Treasury. This fact negates further the need for the Chancellor to increase fuel duty by 2p per litre, which is planned for October. The British Chambers of Commerce called for the scrapping of the 2p increase in the March Budget and we will campaign once again for it to be scrapped in October.

After a long period of relative price stability where costs have been kept down, it is becoming much harder for businesses not to pass these extra costs on to customers. Rather than adding to this burden, the Government should be sending a positive message to vehicle dependent businesses.

Gareth Elliott 
Transport policy adviser, British Chambers of Commerce
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