George Osborne has infuriated environmentalists by announcing big tax breaks for the fracking industry in a bid to kickstart a shale gas revolution that could enhance Britain’s energy security but also increase its carbon emissions.
The Treasury has set a 30% tax rate for onshore shale gas production. That compares with a top rate of 62% on new North Sea oil operations and up to 81% for older offshore fields.
So far, no shale gas has been produced in Britain, but exploratory drilling is under way and the British Geological Survey recently whetted prospectors’ appetites by revealing there could be huge resources waiting to be unlocked, possibly enough to supply the country for 25 years.
“Shale gas is a resource with huge potential to broaden the UK’s energy mix,” said the chancellor. “We want to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits.
“This new tax regime, which I want to make the most generous for shale in the world, will contribute to that. I want Britain to be a leader of the shale gas revolution – because it has the potential to create thousands of jobs and keep energy bills low for millions of people.”
But the generous allowances were condemned by environmental groups worried about the chemicals used in fracking and fearful that burning more gas will make it impossible to hit carbon reduction targets designed to mitigate climate change.
It also comes after a survey showed that nearly 80% of those who were polled believed that the UK should reduce its reliance on fossil fuels.
Lawrence Carter, a Greenpeace energy campaigner, said: “The chancellor is telling anyone who will listen that UK shale gas is set to be an economic miracle, yet he’s had to offer the industry sweetheart tax deals just to reassure them that fracking would be profitable.
“Experts from energy regulator Ofgem to Deutsche Bank and the company in receipt of this tax break, Cuadrilla, admit that it won’t reduce energy prices for consumers. Instead we’re likely to see the industrialisation of tracts of the British countryside, gas flaring in the home counties and a steady stream of trucks carrying contaminated water down rural lanes.”
George Osborne unveils 'most generous tax breaks in world' for fracking