Governments have spent over $20 billion – and have approved up to $200 billion more – of public money on carbon capture and storage (CCS), providing a lifeline for the fossil fuel industry.
79% of operating carbon capture capacity globally sends captured CO2 to produce more oil (via Enhanced Oil Recovery).
Many of the largest CCS projects in the world overpromise and under-deliver, operating far below capacity.
Carbon, Capture, Utilization, and Storage (CCS or CCUS) has a 50-year history of failure. CCS is often presented as a new technology to reduce carbon dioxide (CO2) emissions by trapping CO2 from a smokestack or directly from the air and then injecting it into the ground for storage. In fact, CCS was first developed in the 1970s to enhance oil production, and increased oil production remains its primary use. Oil Change International research finds that 79% of operating carbon capture capacity globally sends captured CO2 to produce more oil (via Enhanced Oil Recovery).
Yet Big Oil consistently tells us that CCS is central to the fight against climate change. Chevron, for example, says that CCS will make a “lower carbon future possible.”
In the run-up to COP28 in the United Arab Emirates, the oil industry and many governments are ramping up their promotion of CCS as an integral part of the collective response to climate change. There has been a flurry of renewed government commitments, conferences, and new industry initiatives, coupled with continuing misinformation. Governments around the world have spent over $20 billion – and have approved up to $200 billion more – of public money on CCS, providing a lifeline for the fossil fuel industry.
In October 2023, ADNOC, the Abu Dhabi National Oil Company, whose CEO, Sultan Al Jaber, is the COP28 President, announced that it planned to double its CCS capacity to 10 million tonnes per year. But ADNOC’s existing flagship CCS project, which is supposed to capture emissions from a steel plant, is only designed to capture around 17% of that plant’s maximum CO2 pollution. Furthermore, there is no publicly available information about how much CO2 it has actually captured. What the CCS project does capture is used to increase oil production, leading to more emissions when burned.
As governments prepare to spend up to $200 million of public money on CCS, it must be clear: CCS is a lifeline for the fossil fuel industry, not people and planet.
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Subsidies
Governments have spent over $20 billion – and have legislated or announced policies that could spend up to $200 billion more – of public money on CCS, providing a lifeline for the fossil fuel industry.
Key facts
Ten governments have already spent at least $22 billion on CCS and Fossil-Hydrogen.
This number is likely very conservative due to a shocking lack of transparency on government subsidies and tax credits.
Twelve governments have approved policies that could funnel up to $200 billion more toward CCS and Hydrogen.
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Carbon Capture Serves Oil and Gas Production
A Majority of Carbon Capture Projects Serve To Produce More Oil and Gas, Not Reduce Emissions
Data from our project’s database and analysis from leading experts such as IEEFA and others show that the majority of carbon capture (CCS) projects exist only to enable oil and gas production and fail to reduce overall emissions.
Key facts
79% of operating carbon capture capacity globally sends captured CO2 to produce more oil (via Enhanced Oil Recovery)
67% of operating carbon capture capacity globally captures emissions from processing CO2-rich gas.
Opaquely funded right-wing think tanks have claimed responsibility for parts of today’s budget, celebrating its announcement as a victory for its lobbying.
Jeremy Hunt unveiled his autumn statement this afternoon, including policies such as a 2% cut to National Insurance, punitive enforcement action for those on disability benefits who do not find work in 18 months, and raising Local Housing Allowance before freezing it again in two years.
A key part of the chancellor’s budget, a policy called ‘full expensing’, means businesses can claim 100% of investment costs such as digital equipment against revenue in the same year, allowing businesses to pay less tax. It was first introduced in spring as a temporary measure but will now be made permanent.
“Amazing news that the full expensing has been made permanent,” the think tank wrote on its X (formerly Twitter) page. “Congratulations to everyone who worked so hard to make this a reality.”
It added: “We at the ASI have been campaigning for full expensing over many years.”
Former chancellor Nadhim Zahawi, a patron of the Adam Smith Institute, has lobbied for full expensing to Hunt in the House of Commons. Zahawi was fired from his role as chair of the Conservative Party and minister without portfolio after breaching the ministerial code by failing to declare he was being investigated by HMRC while chancellor under Boris Johnson.
In the past, companies like Amazon have taken advantage of expensing schemes – in particular, a ‘super-expensing’ short-term policy that allowed companies to write off 130% of investment in infrastructure. The company’s UK division paid no corporation tax for a second year in a row thanks to the scheme.
The Adam Smith Institute, named after the 18th-century Scottish thinker on capitalism, lobbies on issues such as deregulation and lower taxes. It was given the lowest possible transparency rating in openDemocracy’s ‘Who Funds You?’ project earlier this year, but is reported to be partly funded by the tobacco industry as well as American climate denial groups.
Other right-wing think tanks have also lauded the move. In a “wish list” written by free-market think tank the TaxPayers Alliance, it asked the chancellor to “Make full expensing for corporation tax permanent… to reduce the tax penalty on long-term investment.”
The TaxPayers Alliance does not publicise its funders, and was also given the lowest possible rating by Who Funds You?
Allowing businesses to invest more can be positive, so long as public spending isn’t cut in the process, Pranesh Narayanan, a research fellow at the Institute for Public Policy Research (IPPR) told openDemocracy.
“In this autumn statement, the Conservatives are able to ‘afford’ it because they’ve frozen public investment spending from 2025 onwards,” Narayanan said, referring to the billions of pounds of spending cuts forecast after the next general election. “You need both kinds of investment to have a proper economic recovery. You can’t do one at the expense of the other, especially when you have crumbling schools and crumbling hospitals.”
Narayanan added: “This policy is mainly for the benefit of big corporations. We believe we need more public investment.”
Economist Ann Pettifor argues in openDemocracy today that Hunt’s autumn statement “extinguished… any faint hope of the beginnings of an economic revival”.
The energy giant BP has been accused of prioritising its profits over people and the planet after making £2.7 billion in profit over the last quarter, while investing £2 billion in fossil fuels.
Leading think tank IPPR said now was a time when energy companies should be urgently responding to climate change, but instead BP has “doubled down on its oil and gas business to reap enormous profits.”
For every £1 BP spent on low carbon investments in the last quarter, they invested £11 in fossil fuels it was revealed. And since the energy price shock began two years ago, BP has put nine times more into fossil fuels as renewables.
BP also completed more than £14.8 billion of buybacks from surplus cash flow whilst announcing a new round of share buybacks, which will transfer £1.2 billion to shareholders.
“It’s clear that oil and gas companies are prioritising their shareholders at the expense of the transition to clean energy, so the UK government must now take the reins by investing in renewables,” said Joseph Evans, IPPR researcher.
Although BP’s profits have actually fallen on last year, when the oil company saw mega earnings following the rise in oil prices after the Russian invasion of Ukraine, £2.7 billion profit between July and September remains extremely high as organisations ask why ordinary people are still facing high energy bills.
“The government has had countless opportunities to bring down our bills and emissions. Instead, all we’ve had are weakened green policies and massive tax breaks for oil and gas giants,” Friends of the Earth responded.
Industry figures held more than 200 meetings with key politicians in the year following Russia’s 2022 invasion of Ukraine, new research finds.
Prime Minister Rishi Sunak tours a Shell gas plant in Aberdeen in July 2023. Credit: Number 10 (CC BY-NC-ND 2.0)
The UK government’s weakening of its windfall tax on energy profits matched the demands of a high-level lobbying campaign by the oil and gas industry, new research reveals.
Trade body Offshore Energies UK (OEUK), formerly Oil and Gas UK, and its operator members including BP, Shell, ExxonMobil, TotalEnergies, and Equinor, met with ministers at least 210 times in the 12 months following Russia’s 2022 invasion of Ukraine.
The meetings – which include in-person talks with the then Business and Energy Secretary Kwasi Kwarteng and his minister Greg Hands (now the Conservative Party chairman) – are revealed in research by Fossil Free Parliament (FFP), a group campaigning against fossil fuel influence on UK politics.
They form part of a lobbying blitz by fossil fuel firms against the windfall tax, conducted through meetings, drinks receptions, letters, parliamentary groups, and a “fiscal forum” with the Treasury attended by the then chancellor (and now prime minister) Rishi Sunak.
The evidence, published in a briefing today (October 24) and shared exclusively with DeSmog, indicates that certain changes requested by the oil and gas industry were accommodated by the government when developing the scope of the levy.
It comes as Sunak faces criticism for delaying some net zero targets and granting 100 new North Sea oil and gas licences, including Equinor’s Rosebank project. As DeSmog reported in March, the Conservative Party received £3.5 million from fossil fuel and polluting interests in 2022.
A spokesperson for OEUK defended its contact with the government: “We will always champion our industry to all parliamentarians on a cross-party basis and do so in an open and transparent manner.”
Caroline Lucas, Green Party MP for Brighton Pavilion, described the research as “shocking”.
“Fossil fuel giants have been committing countless climate crimes, polluting our planet and reaping obscene profits – while everyone else faces sky-high energy bills and a cost of living scandal,” she told DeSmog.
“This research reveals the extent to which the dirty fossil fuel lobby has been aided and abetted by this Tory government – taking their donations, offering privileged access, and handing over staggering tax breaks and subsidies to carry out yet more climate-wrecking damage.”
Windfall Tax ‘Loophole’
The Energy Profits Levy, known as the windfall tax, was announced by the government in May 2022 to tax energy companies’ billions in excess profits due to the global price spike fueled by Russia’s February 2022 invasion of Ukraine.
Then chancellor Sunak said the windfall tax would raise around £5 billion over the next year to help with cost of living. However, when the levy was passed in July 2022, it included a loophole where companies received 91p tax relief for every pound they invest in UK extraction, in what the independent Institute of Fiscal Studies called a “huge tax subsidy” for energy companies.
As of September 2023 the windfall tax had raised £2.6 billion, just over half of what was promised, and following a year of record profits by five oil majors. Between them, Chevron, ExxonMobil, Shell, BP and TotalEnergies made a total of £195 billion in profits last year.
The new research indicates this ‘loophole’ came about following a surge in meetings and lobbying between OEUK and its member companies with the government,
In June 2022, the month the windfall tax was being consulted on and drafted, meetings between the government and OEUK and its members nearly doubled from 15 to 29, according to the new research.
In the same month, OEUK also wrote letters to Sunak warning the proposed windfall tax would have a negative impact on oil and gas investments in the UK. The letters also called for an emergency summit, including a meeting of the “fiscal forum”, a talking shop between the industry and the Treasury. OEUK describes the fiscal forum as a tool for “facilitating coherent engagement with government authorities to drive the policy agenda”.
On 20 June, the day before the consultation’s launch, the British Offshore Oil and Gas Industry All-Party Parliamentary Group (APPG), which is co-run by OEUK, held a summer reception at the Houses of Parliament. The reception saw speeches from Conservative MP Peter Aldous, the APPG’s chair, and Greg Hands, then a minister in the Department for Business, Energy and Industrial Strategy.
At the reception, OEUK’s then chief executive Deirdre Michie gave a speech claiming the windfall tax could “undermine and disrupt” energy investment at a time when the UK needs to focus on “energy security and working for net zero”.
Three days later, Sunak, Hands and exchequer secretary Helen Whately attended an “Oil and Gas Roundtable”. The meeting, also known as a fiscal forum, was held in Aberdeen, Scotland, with OEUK and members including BP, Shell, Equinor, and TotalEnergies. According to a 28 June letter from Michie, the meeting discussed the “negative impact” of the windfall tax “on investor confidence”, while companies warned of its “damage to the UK’s competitiveness”.
Michie wrote: “While we remain disappointed at the decision to create the EPL [Energy Profits Levy], OEUK and our members want to work constructively with you to help rebuild investor confidence and ensure that the EPL is designed and implemented thoughtfully and is fit for purpose.”
OEUK’s concerns appear to have been taken into account by the government.
For example, in Michie’s 28 June letter she insisted that the windfall must tax end in 2025: “Industry needs certainty that the EPL will be terminated by the end of 2025 at the latest and we would hope that ministerial statements will continue to reinforce the timebound nature of the EPL.” A deadline of 31 December 2025 was later included in the EPL bill.
Michie’s letter also requested that the windfall tax should not apply to the Petroleum Revenue Tax (PRT), a tax break that oil and gas companies receive for decommissioning oil rigs, adding: “[we] have written to your officials with detailed proposals on the changes to the draft legislation and hope you will give this significant consideration”. The final windfall tax bill did not apply to PRT, as Michie had requested.
“This research makes it abundantly clear that our government has an open-door policy when it comes to the fossil fuel industry”, said Carys Boughton, a campaigner with Fossil Free Parliament.
“They ask for special treatment; they get special treatment, and the rest of us pay for it – with obscenely high energy bills, and a worsening climate crisis.”
She added: “Our political leaders should be channelling every effort into a just transition from fossil fuels, but this won’t happen until the industry with a vested interest in keeping us all hooked on oil, gas and coal is kicked out of our politics.”
Jeremy Hunt and the ‘Price Floor’
A tranche of additional documents, obtained by Fossil Free Politics and seen by DeSmog, shed further light on the extent of industry lobbying, which continued beyond the introduction of the windfall tax.
After Liz Truss’s disastrous September mini-budget, newly-installed chancellor Jeremy Hunt used his Autumn statement in November 2022 to extend the windfall tax to 2028 and increase it from 25 percent to 35 percent.
OEUK raised its opposition to these changes with Victoria Atkins MP, Financial Secretary to the Treasury, in a meeting on 17 November 2022.
Minutes of the meeting, obtained via a Freedom of Information request, show the body’s chief executive Deirdre Michie telling Atkins that the windfall tax extension “plays into investors being undermined”, and that the 10 percent increase “will impact companies borrowing and projects”.
Michie also complained of a “lack of engagement” with ministers, and brought up “the previous HMT [Treasury] fiscal forum”.
A few weeks later, on 9 December, Hunt hosted a fiscal forum in Edinburgh with OEUK and its members BP, Shell, Equinor, TotalEnergies and others. There he promised “more regular fiscal forum meetings in future”, according to a Treasury press release.
Ahead of the meeting, OEUK said it would urge the government to “scrap the windfall tax on homegrown energy when oil and gas prices fall back to normal levels”. This would mean that if prices drop below a certain point, the windfall tax could be removed before 2028.
Ahead of the Spring Budget in March 2023, OEUK repeated this demand, reportedly writing to Hunt to call for a “trigger price” which “switches off” the windfall tax.
Lobbying continued through the spring. In a meeting on 15 March with Treasury’s Exchequer Secretary James Cartlidge, OEUK’s new chief executive David Whitehouse told Cartlidge that the industry was “extremely disappointed that oil and gas did not get a mention in the budget” and called for more engagement and “a public signal” to “shore up confidence”.
On 9 June, OEUK got its wish. Hunt introduced a “price floor” to the windfall tax, which meant the tax would end before 2028 if wholesale energy prices fall back to normal levels – as OEUK and member companies had been requesting.
‘Cosy Relationship’
When contacted by DeSmog, OEUK did not address the evidence of lobbying specifically on the windfall tax. A spokesperson said the industry body was “proud” to provide a secretariat function to the all-party parliamentary group for offshore oil and gas.
“The offshore sector is a crucial part of the UK economy, supporting over 200,000 jobs in communities across the country and in nearly every parliamentary constituency,” they said.
“Our industry is playing a vital role in the UK’s low-carbon energy future and paid £11 billion in production taxes in 2022/23. It has paid a total of £400 billion in taxes over the lifetime of the basin.”
Shell referred DeSmog to OEUK for comment. All other companies named in this story were also approached but had not responded by publication.
The Conservative Party, Cabinet Office, and the Department for Energy Security and Net Zero were also contacted for comment.
Tessa Khan, executive director of Uplift, a North Sea campaign and research group, said the findings revealed the latest in the industry’s “long enjoyed unwarranted influence over our politics”.
“This is an industry that has made obscene amounts of money while millions of ordinary people – older and disabled people, families with young children – have struggled to heat their homes,” she said. “That they then lobbied in private against a windfall tax designed to claw back some of these profits, is disgusting if unsurprising.”
“The cosy relationship between government and profiteering oil and gas companies needs to end, not just for the sake of everyone facing unaffordable energy bills, but for a liveable climate too.”
Image of InBedWithBigOil by Not Here To Be Liked + Hex Prints from Just Stop Oil’s You May Find Yourself… art auction. Featuring Rishi Sunak, Fossil Fuels and Rupert Murdoch.
