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Nearly two million tonnes of Co2 emissions could have been cut each year if the government had insulated homes rather than offering tax relief on fossil fuel extraction, a think tank has said.
Analysis previously reported by The Independent has suggested that Chancellor Rishi Sunak’s new tax relief on investment in oil and gas extraction in the UK will cost the taxpayer up to £5.7 billion in the next three years.
That money could have instead been used to insulate two million British homes over the same period, saving 1.8 million tonnes of Co2 emissions every year, according to think tank E3G. Insulation would also have reduced the average household bill by £342 a year, helping families cope with the cost of living crisis, according to the analysis.
Last week, the chancellor announced a series of measures to tackle soaring prices in Britain. They included a temporary 25 per cent windfall tax on the profits of oil and gas companies to help support struggling households.
In order to ensure that companies are not deterred from investment by the new levy, Mr Sunak announced that those that invest in oil and gas extraction would be entitled to hefty tax relief on that spending. The incentive means businesses will overall get a 91p tax saving for every £1 they invest in fossil fuel extraction.
The investment insentive was slammed by climate groups and opposition politicians who pointed out that climate scientists, the United Nations and the International Energy Agency have made it clear that the world needs to stop new investment in fossil fuels if it wants to avoid the worst impacts of climate change. They questioned why the government didn’t extend the incentive to include investment in renewables.
E3G said incentivising oil and gas investment encouraged a slow transition to renewables and pushed companies to allocate profits towards new oil and gas developments instead of renewable alternatives.
If that revenue had instead been spent on supporting energy efficiency measures, it would have the potential to lift households out of energy poverty for good, the think tank added.
Energy efficiency was absent from the chancellor’s emergency support package announcement, meaning UK households’ long-term reliance on gas will remain, it said.
The government has repeatedly defended its need to invest in the oil and gas sector arguing that North Sea oil and gas are crucial to the UK’s domestic energy supply and security for the foreseeable future.
A spokesperson for the government said: “As set out in the British Energy Security Strategy, and with Putin’s invasion of Ukraine illustrating the merit of this, North Sea oil and gas are going to be crucial to the UK’s domestic energy supply and security for the foreseeable future – so it is right we continue to encourage investment there.
“The levy’s investment allowance means businesses will overall get a 91p tax saving for every £1 they invest and allows for investment in activities to cut emissions, which could include electrification.
“We have a proven track record in helping people insulate their homes, with the total number of homes rated ‘C’ or above rising from just 13% in 2010 to over 46% now, and we are continuing this drive through scrapping VAT on energy saving materials and investing over £6.6 billion to support homeowners cut carbon emissions.”