‘A long-overdue first step’: Green groups react energy to windfall tax aiming to ease energy price crisis

edie rounds up the key reaction to the windfall tax announcement

Earlier today, Chancellor Rishi Sunak outlined additional measures to help households pay for skyrocketing energy bills, with a significant portion of the funding set to be raised using a one-off windfall tax on oil and gas majors.

All homes will be eligible for a £400 grant toward their annual energy bills for 2022. More than eight million households on means-tested benefits will also receive lump-sum grant payments worth up to £650 on top of this, in a two-part payment. An additional eight million pensioners will receive a £300 lump-sum grant, and six million people on non-means-tested disability benefits will receive a lump-sum grant of £150.

The majority of the funding for these new measures will be raised using a one-off windfall tax on oil and gas majors operating in the North Sea. Profits will be taxed at a rate of 25% until prices return to a “historically more normal level”. Labour has been calling for such a move for months but the Conservatives have, to date, opposed the idea, arguing that it could dampen these corporations’ investments in low-carbon energy in the UK. The Green Party and Liberal Democrats have also supported the tax.

The decision has been broadly welcomed by green groups and experts, although most agree that the announcement should’ve come sooner, and cannot be the last step to respond to the energy crisis.

Here, edie rounds up the key reaction to the windfall tax announcement.

Caroline Lucas, Green Party MP for Brighton Pavilion

“The long overdue measures announced today are hugely welcome and will be a life raft for the many people who need protecting from soaring bills right now. However, this package doesn’t do anything like enough to keep people afloat in the long-term by bringing down their energy bills, or to keep fossil fuels in the ground where they belong.

“With the energy price cap expected to rise by a further £800 a year in October, the number of people in fuel poverty could reach a staggering 12 million. A windfall tax on the obscene and dirty profits of oil & gas companies is a start, and one which I’ve been advocating for many months – but it’s only a one-off measure that barely scratches the surface of the crisis that millions of families are facing. We can’t simply dust off our hands and stop there, as if it’s job done.

“A windfall tax should pave the way for a future carbon tax on every tonne of CO2 released – a critical lever that would raise billions and mark a genuine gear-change in our shift towards a clean, green economy. Fossil fuels are right at the heart of both the cost of living crisis and the climate crisis – this Government’s failure to tax them properly marks a shameful dereliction of their duty to tackle the biggest challenges of our time. And it would be utterly scandalous if this windfall tax not only allows, but in fact incentivises, investment in yet more climate-wrecking fossil fuels as opposed to renewables.

“This announcement was much needed and long overdue – but it should represent a first step, and not the final one.”

Dr Nina Skorupska CBE, chief executive, the Association for Renewable Energy and Clean Technology (REA)

“The REA has long called for Government intervention to reduce the impact of spiralling energy costs and we welcome the support which will now be provided to low income and vulnerable households in particular. However, the measures announced today by the Chancellor will only provide temporary and partial relief, with struggling households facing unprecedented inflationary costs that aren’t going away any time soon.

“The Government needs to go much further and, in addition to short term cash, lead a national effort to ensure as many households as possible can insulate their homes and install domestic renewables and clean technology before the winter. This will improve energy efficiency, reduce demand for expensive fossil fuels and prevent damaging exposure to volatile global prices.

“The situation remains critical – the Government has to rapidly follow today’s short-term relief with a package of real substance.”

Sue Ferns, senior deputy general secretary, Prospect Union

“As the government considers taxing energy generators further, it must find a way of treating those generators who are supporting the loss-making retail market, and making big investments in new nuclear and renewables, differently to those who are not.”

Caroline Abrahams, charity director, Age UK

“Age UK is pleased and relieved that the Government has recognised the extreme risks soaring inflation pose to the health and welfare of pensioners, particularly those on low incomes, and has announced a package of measures today with the aim of mitigating them. With prices continuing to go up for everything they buy, life is certainly not going to be easy for many older people over the next few months, but the extra support the Chancellor is bringing forward will make a difference and will protect most from the worst of the unprecedented surge in the cost of living they face.

“No one knows what will happen to prices later in the year and it may well be that the Government will need to go further and do more in the autumn Budget, if inflation goes on ratcheting up. At Age UK we will be tracking the experiences of older people, especially those on low incomes, as the months go by.  We will also continue to campaign with others for more investment in energy efficiency and for the reintroduction of a social energy tariff since, in the longer term, these would help pensioners to keep on top of their energy bills and support progress towards our zero carbon targets.”

Sam Nadel, head of government relations, Oxfam

“About time! It’s right that fossil fuel companies making excess profits are being asked to contribute more at a time when so many families in the UK have run out of options and can’t afford to pay the bills, with little left to cut back on.

“The Government is right to prioritise those on the lowest incomes and support them through the social security system – these payments will be especially important for sick and disabled people who often require more energy. Ensuring that this support reaches those who are most in need quickly and efficiently must now be the priority.

 “The energy price crisis is a stark reminder of our over reliance on fossil fuels. We should be strengthening our energy security through investment in our own abundant renewables which are cheap, secure, and clean forms of energy.”

Julie Hirigoyen, chief executive, UKGBC

“The payments announced today will help households in fuel poverty, which at this moment of crisis is welcome. But it will do nothing to stop the annual loss of £500 from heat leaking out of every window, wall and roof of their poorly insulated homes.

“The longer the Government puts off the real solution, implementing a large-scale home upgrade drive to make homes more energy efficient, the longer desperate households will suffer in the cost of living crisis. As things stand there is no end in sight to rising energy bills, and no prospect of meeting the UK’s climate commitments.”

Luke Murphy, associate director for energy and climate, IPPR

“This government’s decision to levy a windfall tax on oil and gas firms is a welcome U-turn in the direction of common sense. However, giving these firms even bigger tax breaks to extract more oil and gas will lock in greater dependence on fossil fuels – this is bad for future energy bills, our energy security, and our environment.

“Now it’s sought to address the immediate challenges, this government must focus on the root causes of our energy problems and bring forward a serious plan to reduce our reliance on fossil fuels which its so-called energy security strategy failed to deliver. That means backing the cheapest and quickest form of clean energy in onshore wind and investing in a mass homes upgrade programme to make people’s homes warmer, cut energy bills, and reduce our dependence on gas.”

Isabella O’Dowd, head of climate policy, WWF

“While a windfall tax for the biggest greenhouse gas polluters is welcome and well overdue, it’s nonsensical to then siphon profits into an investment allowance that supports domestic gas and oil extraction.

“Climate change does not adhere to country boarders; fossil fuels are fossil fuels, and wherever they are extracted they stoke the cost of living crisis and cause horrendous damage to our planet.

“If this government is serious about protecting customers longer term, tackling the energy crisis and reaching net zero goals, it must divert investment from fossil fuels towards renewables, and into improving the energy efficiency of our homes, benefiting people and the environment now and in the long term.”

Jess Ralston, senior analyst, Energy and Climate Intelligence Unit (ECIU)

“One off payments to the most vulnerable will help to ease some worries about energy bills this winter. But the glaring omission from the Chancellor was a lack of a plan for home insulation, and with Ministers admitting that Treasury is blocking investment into energy efficiency, what will happen with household bills next year, beyond a stop-gap windfall tax?

“Temporary solutions are a sticking plaster and all estimates show gas prices will be high for years to come, so investing in insulating our leaky roofs and walls makes the best long-term use of taxpayers money. Reforming the energy market to detach expensive gas from wholesale electricity price is a logical, necessary step that will drive down bills, especially given how much cheaper wind and solar generation is today.”

Michael Grubb, professor of energy and climate change & deputy director, UCL Institute for Sustainable Resources

“After resisting for months, a windfall tax was becoming inevitable. The first focus will be on the government plans for redistributing the revenue. But a second question is now also unavoidable. What will the government do with the UK energy system?

“Our electricity market means that consumers pay doubly for the high cost of gas – once through heating, and again through the impact of gas on electricity prices, even though renewable energy is now far cheaper. It is the system itself that needs bold measures: to invest in energy efficiency, remove removal of obstacles to the cheapest and quickest renewables available, and reform how the market works.”

Mike Thornton, chief executive, Energy Saving Trust 

“In the face of unprecedented energy price increases, unprecedented action is required. We therefore welcome Government bringing forward a package of measures to provide direct financial support to low-income and vulnerable households struggling to pay their energy bills.  

“Funding this is in part by a temporary levy on the unexpected profits of oil and gas extraction companies is a pragmatic solution. It is vital for these companies to maintain investment into renewable energy projects to further reduce our reliance on volatile fossil fuel markets and cut carbon emissions. Whilst the measures announced today will provide some welcome relief for many families across the country, this energy crisis is far from over. Government must not lose sight of the need to address energy consumption and reliance on fossil fuels in the long term in order to reduce costs and tackle the climate emergency.”

Simon Virley CB, vice chair and head of energy and natural resources, KPMG

“Ofgem estimates that average energy bills this winter will be about £1,500 higher than last winter, pushing 40% of households into fuel poverty without further support measures. The Chancellor has announced an extra £15bn of support, with a number of measures targeted to help those on lower incomes.  However, even more help could have been provided for those most in need by not promising £400 off energy bills for all households, some of whom can afford to pay the increase in bills. 

“Alongside providing immediate help to households, the Government should also be making a major push on energy efficiency, just as other European countries are. That remains the most cost-effective way to get bills down permanently, reduce our dependence on imported gas and lower our carbon emissions.”

Mike Foster, chief executive, Energy and Utilities Alliance

“We welcome the announcement from the Chancellor on the grants for households that finally provide a lifeline to those struggling with the elevated cost of energy bills. This type of short term measure is a vital step in protecting the most vulnerable in our society from falling into fuel poverty as the energy market remains turbulent in the approach to another Price Cap rise in October.

“Now, the Government needs to look at the long-term protection of the British people and their financial situation in the face of rising energy costs by urgently shifting away from fossil fuel gas to hydrogen, using the world-class gas networks already underground to supply our homes and businesses. This will create more secure energy supply to homes breaking free from the blood-stained hands of President Putin, and positioning the UK as the world’s leading hydrogen economy.

“Consumers will avoid major disruption to their lives, minimise the costs associated with achieving net-zero, at the same time help save the planet from climate change, and keep Putin’s gas in the ground. Avoiding a cost burden on the British public and removing the reliance on foreign fossil fuel supplies seems like a no brainer to the heating industry, so we call on the government to think ahead and start the wheels in motion for developing the hydrogen economy now.”