The windfall tax as introduced by Sunak includes a loophole allowing a 90 percent rebate for their profits if companies promise to reinvest in more fossil fuels.
There is understandable outrage as the announcements of record profits of the oil and gas corporations coincide with unpayable energy bills.
Profiteering is always repugnant but profiteering at the expensive of families whose children are going hungry is simply intolerable in a civilized society.
As Antonio Guterres, the UN secretary general, Tweeted: "It is immoral for oil & gas companies to be making record profits from the current energy crisis on the backs of the poorest, at a massive cost to the climate. I urge all governments to tax these excessive profits & use the funds to support the most vulnerable people."
Denialists
This irrefutable moral case explains why Rishi Sunak, the former UK chancellor, committed such a dramatic u-turn over a windfall tax back in May.
But a closer look at the so-called "temporary targeted energy profits levy" shows that it is anything but an attempt to bring super-normal profits into the public purse.
The windfall tax as introduced by Sunak includes a loophole allowing a 90 percent rebate for their profits if companies promise to reinvest in more fossil fuels.
And since this exemption is not available for investment in renewables, the tax change literally encourages fossil investments in the middle of a climate emergency.
Climate denialists have simply lost the war in the face of daily evidence of climate breakdown - but they are still fighting skirmishes and using their massive resources to distort public debate.
Demise
So we hear nonsense about gas being a ‘transition’ fuel and see BP still trying to brand themselves as being somehow "beyond petroleum".
The facts expose this for the deceit it is. The reality is that BP is spending $3.5 billion of its massive profits buying back its own shares. It claims that it will spend $2.5 billion on low carbon energy globally - but in reality only spent $361 million in the first half of 2022.
And then we have journalists who have bought the fossil line about their profits already being shared with us all because our pension funds are the golden shareholders.
This ignores the fact that some of the largest pension funds in the world are rapidly divesting themselves of fossil shareholdings, including ABP, Aviva, and New York state. The pension funds have understood that net zero targets mean fossil fuels have no future. Journalists? Not so much, it seems.
The windfall tax as introduced by Sunak includes a loophole allowing a 90 percent rebate for their profits if companies promise to reinvest in more fossil fuels.
Some see the North Sea fossil reserves as a goose that has laid the golden egg but if we are to meet our net zero targets it is a goose that is facing imminent demise.
Clean energy
Since the UK is signed up to a pathway to net zero, our current chancellor should be ensuring that investments in fossil fuels become increasingly less attractive as the industry is phased out.
The failure of Sunak to adequately tax the super-profits being made in the North Sea has left many families struggling today but it also threatens their children’s futures.
If these profits are distributed to shareholders this will reverse the historic trend of divestment by pension funds, who are supporting the energy transition by selling off their fossil fuel shares.
We cannot allow a temporary post-Covid boom in demand and the war in Ukraine to reverse our progress in divesting from the industry that is destroying our climate.
In this climate emergency, the government’s role is to manage the decline of our oil and gas production and to stimulate investment in clean energy.
Hikes
But the Treasury is continuing to pour fuel on the fire of the climate emergency by exempting fossil companies from the windfall tax if they develop more reserves.
These next few years are crucial to preventing runaway climate change and we cannot allow a temporary surge in oil and gas prices to throw us off track. We know that to maintain a liveable climate we need to keep at least 70 percent of known reserves in the ground.
A windfall tax that makes fossil investments unprofitable is essential to keep us on a pathway consistent with the Glasgow Agreement.
When I was the European Parliament’s rapporteur on sustainable finance my main message was that politicians need to ensure clear signalling.
Investors need to be absolutely confident that profits in fossil fuels are short term and diminishing. We were succeeding in this until the latest massive price hikes.
Shareholders
Politicians need to act now to make sure these are not read by market actors as signals that they should rush back into fossil fuels.
Ensuring that all super-normal profits that are not reinvested in renewable energy will be taxed into the public purse is the only way to achieve this.
We fought a long, hard battle to put the world on the road to a renewable future. This current energy crisis demonstrates the vulnerability that comes from a dependence on fossil fuels.
We must not be diverted from our path by covid or by Putin: shareholders must not be rewarded for investment in climate chaos.
This Author
Professor Molly Scott Cato is the Green Party's spokesperson on finance and economy and a professor of economics at Roehampton University.
