Today’s announcement on fracking has tilted the balance further in favour of fossil fuels


Lawrence Carter is an energy campaigner for Greenpeace

Fracking Today George Osborne more than halved the amount of tax the UK’s nascent shale gas industry will need to pay, from 62 per cent to 30 per cent.

The chancellor has spent the last couple of years evangelising about the economic miracle heading our way once we start fracking, but has now been forced to offer the industry a sweetheart tax deal just to reassure them that extraction would be profitable.

Osborne has repeatedly claimed that UK shale gas will bring down energy bills, which is clearly an attractive proposition when the cost of energy has become one of the most important issues on the doorstep.

Similarly, the prime minister has positioned shale gas within his narrative of a ‘global race’, this week arguing that “you’ve got to exploit the new industries and you’ve got to make sure your energy prices aren’t rising ahead of your competitors.”

The problem with this otherwise convenient narrative is that it doesn’t seem to be founded on much evidence. Experts from energy regulator Ofgem, the Oxford Institute for Energy Studies, commodity analysts at Deutsche Bank, and even fracking company Cuadrilla, have all said that UK shale gas will not reduce energy prices.

While advocates of shale gas repeatedly point to the huge impact it has had on energy prices in the US, they ignore some fundamental differences between the UK and US contexts. For instance, the reason gas prices came down so significantly in the US, was because of a combination of weak demand caused by recession and an inability to export significant volumes, leading to a gas glut.

The UK on the other hand,  is connected to the rest of Europe via pipelines through which we can export and import gas. This is significant, because it means that the amount of UK shale gas extracted would have to be big enough to impact on the entire European gas market. As the Oxford Institute for Energy Studies argues:

“the levels of UK shale gas production… are highly unlikely to influence UK wholesale gas prices, given the physical linkage of the UK to international gas markets. They are also unlikely to reduce gas import requirements from present day levels.”

So where exactly are the prime minister and the chancellor getting this from? Recent reports have suggested that it could be from the same place they’re accused of getting their advice on cigarette packaging, election coordinator Lynton Crosby. As The Independent reported, Crosby has financial interests in the shale gas industry through his lobbying firm, Crosby Textor. He’s also the man credited with developing Cameron’s narrative of the ‘global race’.

Whether or not Crosby has been involved, sacrificing evidence-based policy making in favour of a clear narrative is a dangerous game to play. Especially when it results in the industrialisation of tracts of the British countryside and gas flaring in the Home Counties. As the FT recently revealed, 35 Conservative MPs in the South East could face fracking in their constituencies and a backlash is already underway.

To truly compete in a global race the government needs to stop playing politics with fracking and give certainty to the UK’s clean energy sector, which can create thousands of jobs and deliver real energy security. A recent report by IPPR argues that “weak and unclear signals from government on the long-term future of renewable energy mean the UK is at risk of a ‘worst of all worlds’ outcome: high costs combined with low pay-offs in the form of jobs and trade”.

So while Osborne and Cameron are peddling pre-packaged lines on the ‘global race’ and ‘shale gas revolution’, real damage is being done to the sector that can deliver energy security, rebalance the economy, create jobs and help tackle climate change.

The International Energy Agency has described how “huge subsidies and tax breaks are tilting the global energy market in favour of fossil fuels” and have labelled them “public enemy number one for green energy”.

Today’s announcement just tilted that balance even further.

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  • JC

    Is this 62% tax rate the amount that energy producers pay (including renewables) or is it the top rate that North Sea gas/oil extractors pay (with other, lower rates)? How about the corporation tax that will also be paid?

    30% seems quit high to me. What other energy producers pay this much?

  • steve

    you wouldnt expect a shale gas bonanza in the UK to reduce UK gas prices (much) because we are in an international market. It will, however, supply a large amount of money to the exchequer that means we can spend more or lower taxes elsewhere.

    What we will actually get is worldwide shale gas bonanza which will halve gas prices for the next 50 or more years by which time we’ll all have personal fusion generators.

  • steve

    “the levels of UK shale gas production… are highly unlikely to influence UK wholesale gas prices, given the physical linkage of the UK to international gas markets. They are also unlikely to reduce gas import requirements from present day levels.”

    that text does not exist in the link you gave

    “They are also unlikely to reduce gas import requirements from present day levels” is a ludicrous statement. Shale gas has the potential to far more than compensate for reduced north sea gas production.

  • treborc1

    I think coal should make a come back since we are going to use gas and Oil again, coal which is just as clean should be used and it may even bring in much needed jobs.

  • blarg1987

    I think that unlikely, unless the state uses the revunue raised to push reasearch into nucelar fusion etc as the markets won’t do it when it costs them money.

  • steve

    there is plenty of fusion research going on. i wouldnt expect private companies to be involved at the research level

  • steve

    and you can get the energy of coal out without even digging it up. pump down steam which reacts with the coal to create almost pure CO2 (which can be stored) and hydrogen which can be used for anything

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