Britain’s windfall tax on oil and gas profits must be changed to raise billions more and prevent companies using loopholes to invest in more fossil fuel extraction, the president has said as he emerged from talks worldwide on climate.
“These are excessive profits and should be dealt with appropriately when it comes to taxation,” said Alok Sharma, chair of the UN’s Cop26 climate summit. “We need to go further and see what else can be done in terms of raising additional funding [from the profits]. So far, at least, the level of money raised is obviously not significant.”
The UK is facing a cost of living crisis and the Treasury has to plug an estimated £50 billion hole in the country’s finances.
Shell admitted this week that it had not paid any extraordinary tax despite making record profits of $30 billion so far.
The oil company said it had taken advantage of a loophole that exempts companies that invest their surpluses in increasing oil and gas extraction. US fossil fuel firm ExxonMobil reported a quarterly profit of nearly $20 billion on Friday, $4 billion more than expected.
Sharma said: “There’s really an incentive for these companies to do more in terms of oil and gas. What we want them to do, if we want to achieve our goal of 100% clean energy by 2035, is to accelerate the deployment of renewables “.
He also said the UK’s push for more gas extraction – the government is authorizing new drilling in the North Sea and offering tax breaks to increase output from existing wells – was at odds with the legally binding commitment of reach zero net greenhouse gas emissions by 2050.
“The International Energy Agency has been clear that, in terms of new fields, they do not believe this is consistent with a 1.5C pathway, and the onus is on all governments, including the UK, to explain how the policies they have on oil and gas, or any other policy, are consistent with their legally binding commitments.”
He said companies should be offered incentives to increase their investment in renewable energy instead of fossil fuels. “This is the way to get faster delivery of renewable energy across the UK,” he told the Guardian. “What we want to see is a great expansion of renewables.”
Sharma was praised around the world for his role in leading the UN Cop26 climate talks last November in Glasgow, where he forged a global pact to limit temperature rise to 1.5 degrees Celsius above pre-industrial levels. His role as chairman of the talks ends next week, when the Cop27 summit begins in Egypt.
This week he was stripped of his cabinet post by Rishi Sunak, sparking concern among environmentalists about the incoming prime minister’s commitment to tackling the climate emergency.
Sharma and Graham Stuart, the climate minister, will keep their current roles but will not attend cabinet, leaving the government for the first time in years without a cabinet minister focused on the climate crisis.
Downing Street said on Thursday that Sunak would not attend Cop27, in defiance of Egyptian hosts and US President Joe Biden, who will attend.
A diplomat from a developed country heavily involved in the Cop27 talks told the Guardian: “It seems as if the new prime minister wants to wash his hands of the previously strong role the government played in international climate action. Also, it’s another stab in the back for Sharma.”
Sharma, however, defended the Prime Minister. “Rishi Sunak has made a good start on these issues. He has already ruled out fracking… and said in response to a question at PMQs [prime minister’s questions] that we will fulfill what we said to Cop[26]. The reason for this is that he obviously cares a lot about passing on to our children an environment in a better state than we were in. That’s a really positive statement.”
Sunak’s predecessor, Liz Truss, actually banned King Charles from attending Cop27, prompting diplomatic protests around the world, as the king has been a major figure at previous Cops, including Glasgow and the summit in 2015 that produced the Paris climate agreement. Downing Street confirmed on Friday that the king would not attend, although Egypt’s foreign minister in charge of Cop27, Sameh Shoukry, told the Guardian the invitation was still open.
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Speaking ahead of Downing Street’s confirmation, Sharma said King Charles was considered an international leader on climate matters. “He’s been focused on this for decades, long before this was commonplace. And of course, he’s also the boss of [state] of other nations, some of which are on the front lines of climate change. I would very much like him to be there, but at the end of the day this is a matter between him and the government.”
With the war in Ukraine and a confrontation between the US and China over Taiwan, the prospects for Cop27 have darkened. Sharma left Cop26 warning that the 1.5 degree Celsius limit, beyond which the impacts of the climate crisis will quickly become catastrophic and irreversible, was “on life support”.
Last week, the UN published two reports showing that governments have failed to reduce greenhouse gas emissions fast enough to meet the 1.5C target, with current pledges falling short deadline on emissions that can increase temperatures by 2.5 ºC. Only 24 countries have come forward with new plans to cut emissions since COP26, although all those in Glasgow have pledged to do so.
Sharma said it was still possible to make progress at Cop27 on reducing emissions. “What we have seen [since Cop26] it’s geopolitics changing quite significantly…with Putin’s illegal war in Ukraine. This has meant that world leaders have to deal with immediate problems in terms of the energy crisis, food security issues, rising inflation and rising debt levels. This is completely understandable. However, what we have also seen is that the chronic threat of climate change has not gone away; it has gotten worse.”
Sharma has spent much of his time as president of Cop26 (his term was extended after the Covid pandemic delayed Cop26 by a year), speaking and visiting developing countries on the front lines of the crisis.
“I was at the UN General Assembly a few weeks ago and had the opportunity to speak with Pakistan’s Minister of Climate Change. It was truly incredibly moving to hear her speak about the dire danger facing so many million people now in Pakistan as a result of which a third of the country is under water, the same amount of land under water as the UK itself,” he said. said
“You have 5 million people facing a food crisis and more recently you’ve seen floods in Nigeria, the worst floods in a decade, with a million people displaced. So what countries will have to do is , while dealing with immediate problems [of energy and food prices]they also continue to address the issue of global warming.”
Rising gas prices have pushed governments, including the UK, back to fossil fuels, but Mr Sharma said that was likely to be temporary as renewable energy was cheaper. “The war has meant that countries are accelerating their transitions to clean energy and going faster than they would have done otherwise. To meet immediate energy needs, you see some countries making more fossils, more coal, but you also see that they absolutely double with more renewables.”
Sharma, who backed Boris Johnson’s aborted bid to return as UK prime minister, faces an uncertain political future when his term as police chief ends. But he vowed to keep talking: “I’m not anymore [cabinet] minister but I have a voice. I will use this voice. Ultimately, we will be judged as a government by whether we keep the promises we’ve made and whether we keep our commitments.”