To avoid windfall tax, UK may ask for quarterly green plans

Jessica Shankleman 5/23/2022

(Bloomberg) — Energy companies will need to provide updates each quarter on how they’re boosting clean energy investments in order to avoid a UK windfall tax on their surging oil and gas earnings, British government minister Alok Sharma said.

Producers are making “extraordinary” profits with rising prices, said Sharma, who’s also president of the COP26 climate summit. Failing to disclose how those earnings are being ploughed into green initiatives would mean “all options are on the table,” he said in a Bloomberg television interview at the World Economic Forum in Davos. 

Sharma’s comments come after Chancellor Rishi Sunak said he may impose a windfall tax if companies fail to make a “significant investment.” But Business Secretary Kwasi Kwarteng on Friday refused to set targets, creating some confusion about what the government wants firms to do to avoid the levy. 

Large firms including BP Plc and Shell Plc have promised more spending in the UK, but their massive profits in the past quarter have deepened the debate in Britain about whether the special tax should be levied to ease the burden on households dealing with the highest rate of inflation in 40 years.

Eni SpA plans to invest 2.5 billion euros ($2.7 billion) in the UK over the next four years, 80% of which will be spent on renewables and carbon capture projects and 20% on oil and gas production, the company said, confirming figures earlier reported by the Financial Times.

“What they’ve talked about is investing some of that money -- billions in clean energy,” Sharma said. “I want these companies to set out quarter by quarter, just as these profits are coming through quarter by quarter, what their plans are in terms of delivering on a clean energy transition in the UK.”

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