Research from New Economics Foundation (nef) and WWF (World Wildlife Fund) reveals the paradox of the UK Treasury hooked on income from the oil and gas sector, yet missing a never-to-be-repeated opportunity to invest in the transition to a sustainable energy system by failing to tax surplus profits from oil. This briefing, written by Andrew Simms, David Woodward, Petra Kjell and James Leaton, provides a snapshot of the UK Exchequer’s reliance on revenue from fossil fuel industries.
Nearly half of the UK economy depends in one way or another on petroleum-based products in order to function. This raises two major issues. First, with so much income from fossil fuels, is there a powerful disincentive for the government to kick the fossil fuel habit? The second issue is how the country will handle the changed income effects if it does successfully kick the fossil fuel habit? Careful planning and effective action to minimize the impacts of climate change could allow a smooth transition. Following the example set by Norway, the authors propose the establishment of an Oil Legacy Fund. The fund will be paid for primarily by a Windfall Tax on oil and gas company profits.
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Simms, Andrew, David Woodward, Petra Kjell, and James Leaton. 2006. Hooked on oil: breaking the habit with a windfall tax. The UK Exchequer’s dependence on fossil fuel income. London: New Economics Foundation. http://www.neweconomics.org/gen/z_sys_PublicationDetail.aspx?PID=231.