Reeves promised oil industry ‘quid pro quo' over windfall tax in private meeting
The chancellor, Rachel Reeves, told a fossil fuel company the industry would receive a 'quid pro quo' in return for higher taxes on its windfall profits, it can be revealed.
In a meeting with the Norwegian state energy company Equinor on 27 August, Reeves suggested that the government's carbon capture, usage and storage (CCUS) subsidies were a payoff for oil firms being hit with a higher tax rate.
Minutes of the meeting obtained by DeSmog and seen by the Guardian state that Equinor's CEO, Anders Opedal, raised concerns over the energy profits levy – also known as the 'windfall tax' – and 'its impact on the value' of Equinor's UK portfolio.
In response, Reeves said that raising the windfall tax from 35% to 38% was a 'manifesto commitment', but stated that 'Equinor should recognise the quid pro quo – the funds raised enable government investment in CCUS etc'.
CCUS is the controversial practice of trapping the emissions produced by fossil fuel plants before they enter the atmosphere. Many scientific experts have suggested the technology is not economically viable. It is accused of being a favourite climate 'solution' of the fossil fuel industry since it allows for the continued extraction of oil and gas.
The Labour government announced in October it would provide £22bn in subsidies to CCUS projects over 25 years after an increase in lobbying by the fossil fuel industry.
The Green party co-leader, Carla Denyer, said Reeves and the Labour government had been 'caught out making promises in a secret exchange deal which goes against the interests of the British people'.
The MP for Bristol Central added: 'In public, they claim to be taxing fossil fuel giants more fairly by raising the windfall tax, but behind closed doors they are giving back with dodgy deals to allow the fossil fuel corporates to continue with business as usual under the guise of CCUS – an expensive distraction and largely unproven technology.'
Equinor is one of the main companies investing in the UK's CCUS sector. In December, the government signed deals with Equinor, BP and TotalEnergies to develop carbon capture facilities in Teesside. This will involve the development of the Net Zero Teesside power plant, which will be 25% owned by Equinor and aims to be the world's first gas-fired power station featuring CCUS.
Earlier this year, Equinor was forced to retract a claim that it stores 1m tonnes of carbon dioxide annually at its flagship carbon capture project in the North Sea. Equinor has not captured 1m tonnes of CO2 per year at the site since 2001, and only captured a 10th of that figure in 2023.
Equinor made a $28.7bn (£21.2bn) post-tax profit in 2022 after Russia's invasion of Ukraine triggered higher oil and gas prices – a figure that stood at $8.8bn in 2024.
Tessa Khan, the executive director of the campaign group Uplift, said: 'Oil companies like Equinor have held sway over successive UK governments, for years shaping policies to benefit their bottom line and slowing down climate action. This Labour government must stand up to them and put our needs – for affordable clean energy and a safe climate that we can pass on to our children – ahead of their insatiable need to profit.'
The House of Commons' public accounts committee, which scrutinises government spending decisions, released a report in February describing the UK's £22bn CCUS subsidies as 'risky'.
The report noted that the government has downgraded its ambitions for CCUS storage, scrapping its previous commitment of storing 20 to 30m tonnes annually by 2030. It also highlighted that the UK's new CCUS projects do not allow the government to share any potential profits, or for local consumers to benefit from lower energy bills.
The committee also reported that producing liquid natural gas, which will be used in the UK's CCUS projects, leaks more greenhouse gases into the atmosphere than previously thought. 'This could undermine the rationale for pursuing certain schemes,' the report said.
After being sued by the environmental consultant Andrew Boswell over the Net Zero Teesside scheme, the previous Conservative government admitted it had not taken into account the plant's full potential emissions, which Boswell estimated could reach more than 20.3m tonnes of carbon dioxide equivalent during its lifetime.
In summer 2024, a judge rejected Boswell's case, which argued that officials did not fully explore the environmental impacts of the scheme before approving it. The government also won the appeal in May.
Sign up to First Edition
Our morning email breaks down the key stories of the day, telling you what's happening and why it matters
after newsletter promotion
Boswell, who leads the Scrap Carbon Capture campaign, called Reeves's Equinor meeting 'an outrageous spectacle'.
He said: 'She begs Norway's oil colossus to tax its huge profits, and then gifts it with far more in return – many billions over decades for climate-wrecking CCUS.'
Equinor and Shell have formed a joint venture to become the UK's largest North Sea fossil fuel producer. In November, the government admitted it had unlawfully approved the development of the UK's largest untapped oilfield, Rosebank, which is operated by Equinor, by not taking into account the climate effects of the combustion of oil and gas to be extracted from the field. Equinor intends to reapply for approval to develop the field.
The Labour government has been steadfast in its support for the UK achieving net zero emissions by 2050, with Keir Starmer having said 'homegrown clean energy' is 'in the DNA' of his administration.
The Climate Change Committee stated in its 2025 appraisal of the government's net zero policies that the UK needs to scale up its CCUS capacity to 73m tonnes-a-year by 2050 to help meet its climate commitments.
'Investment in carbon capture and storage is a gamble on unproven technology,' said Lily-Rose Ellis, a campaigner at Greenpeace UK. 'All it does is give oil and gas giants carte blanche to continue causing planet-destroying emissions in the hopes that one day they might be able to capture the carbon and store it for all of eternity. Public money should be spent on renewables, which guarantee to lower emissions, bring bills down and boost the economy with new jobs.'
A spokesperson for Equinor said: 'Equinor has been a reliable energy partner to the UK for over 40 years, providing a stable supply of oil and gas, developing the UK's offshore wind industry, and pioneering solutions to decarbonise the UK economy, including carbon capture and storage.
'Using our experience of decarbonising energy production in Norway, including safely storing carbon emissions under the North Sea for over 25 years, we are supporting the UK to develop its own homegrown energy transition.'
A government spokesperson said: 'We are delivering first-of-a-kind carbon capture projects in the UK, supporting thousands of jobs across the country, reigniting industrial heartlands and tackling the climate crisis. Money raised from changes to the energy profits levy made at autumn budget last year support the transition to clean energy, enhance energy security and independence, provide sustainable jobs for the future, and help protect electricity bills against future price shocks.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
18 minutes ago
- Reuters
France tightens grip on Eutelsat through 1.35 bln-euro shares sale
PARIS, June 19 (Reuters) - The French state will become Eutelsat's ( opens new tab top shareholder following a 1.35 billion-euro ($1.55 billion) capital increase aimed at helping the satellite company better compete with Elon Musk's Starlink, the finance ministry said on Thursday. The capital injection will deliver a shot in the arm to debt-laden Eutelsat, which has garnered unprecedented attention this year from European governments looking for alternatives to compete with Elon Musk's Starlink. France's state shareholding agency will inject 717 million euros, or more than half of the sum, into the company, the ministry said. The agency will also acquire the stake held by France's state-owned investment bank Bpifrance in Eutelsat as part of the company, a government official said, bringing France's total stake to 29.99%. "The French government is proud to support Eutelsat. By participating in its capital increase, we are supporting a decisive stage in its development. Satellite connectivity is a strategic issue for our industrial and digital sovereignty," Finance Minister Eric Lombard said. ($1 = 0.8721 euros)
Reuters
19 minutes ago
- Reuters
ECB's Nagel says savings union more urgent than banking union
MILAN, June 19 (Reuters) - Creating a European Union savings union has become a matter of urgency, European Central Bank policymaker and Bundesbank President Joachim Nagel said on Thursday, adding a closer banking union could follow after that. European policymakers are seeking to foster deeper and more integrated capital markets across the often fragmented 27-member bloc. As part of that, they are pursuing a "savings and investments union" to try to encourage retail investors to fund the investments in energy, defence and technology European needs to bridge the productivity gap with the United States and China. Europe has fallen behind the other major global economic powers, posing a threat to its citizens' living standards. Given growing competition among economic blocs and tense relations with the United States, where a large portion of European savings has typically been invested, Nagel said there was no time to lose. "I think the first step, I believe this is of utmost importance, is to establish the savings and investment union, to do much more here. I think this is now of utmost importance," Nagel told a student conference in Milan. "And then in the next step, we can do the banking union," he said. Speaking at the same conference, UniCredit ( opens new tab CEO Andrea Orcel said the EU needed to become more competitive, which he has perviously said would happen if European banks were allowed to grow in size to better compete with U.S. rivals. Orcel, whose ambitions to take over Commerzbank ( opens new tab have stalled due to strong German opposition, complained about the barriers raised by European governments against the bank's consolidation efforts. Nagel said he shared Orcel's view about the need for Europe to become more competitive, and reiterated his support for a banking union. But he said he thought the banking union was first of all about more uniform rules across different markets, with countries adopting a neighbour's best practice standards wherever necessary, and then consolidation could follow.
BreakingNews.ie
27 minutes ago
- BreakingNews.ie
EU foreign affairs chief criticised over ‘clear lack of understanding of Ireland's history'
A vice-president of the European Commission has been criticised over a 'clear lack of understanding of Ireland's history', following a debate in the European Parliament. Kaja Kallas, the former Estonian prime minister who now serves as one of the vice-presidents of the Commission, singled out Ireland during a debate on the upcoming 2025 Nato summit in the Hague. Advertisement Ms Kallas said Ireland got to 'build up their prosperity' during peace after the second World War while countries behind the Iron Curtain experienced 'atrocities, mass deportations, suppressing your culture and language'. The remarks have been criticised as 'deeply inaccurate' by Sinn Féin MEP Kathleen Funchion, who said the vice-president was dismissive of the post-war experience of people on the island of Ireland. Ms Kallas address to the opening session focused on the 'direct threat to the European Union' posed by Russia, as she called for member states to act with Nato allies and increase defence spending. Ms Funchion noted the sovereign right of each member state to choose its own foreign policies and whether or not they participate in military alliances such as Nato – particularly emphasising Ireland's longstanding policy of military neutrality. Advertisement 'I hope each of you too recognises the sovereign right of my country, Ireland, to maintain its historical policy of neutrality. 'We in Ireland have a proud history and tradition of UN peacekeeping, and long may that continue.' Sinn Féin MEP Kathleen Funchion. Photo: Brian Lawless/PA She added: 'I feel it is important to reference the creeping militarisation into EU politics. 'This debate has been a combination of maddening and depressing for the past two hours, listening to the vast majority of speakers. Advertisement 'I would also remind people that, at its core, the EU is supposed to be a peace project and we should not move away from this.' In response, Ms Kallas warned that while Europe is a 'peace project', it 'only takes one to want war' 'We very clearly see right now the talks about the ceasefire that Russia doesn't want peace.' She added: 'I also want to address our Irish colleagues. Yes, peace doesn't mean that the human suffering will stop. Advertisement 'If you surrender, you have the aggressor, and you say, 'OK, take all what you want', then it doesn't mean that the human suffering will stop. 'Our experience behind the Iron Curtain after the Second World War, countries like Ireland got to build up their prosperity, but for us it meant atrocities, mass deportations, suppressing your culture and language. 'This is what happens. It is also peace, but it's actually not freedom. It's not freedom of choice for people, and that is what the European Union is all about, and that is what we are also fighting for.' In a statement, Ms Funchion said Ms Kallas' comments were 'ill-advised and deeply insensitive to the experiences of Irish communities still seeking justice to this day'. Advertisement 'Ireland too endured atrocities, from the Ballymurphy massacre to Bloody Sunday, where innocent civilians were shot and killed by British soldiers. 'Our people suffered internment without trial, and widespread discrimination in housing and employment, particularly in the North. 'Furthermore, the suppression of Irish language and culture has been an ongoing battle, as evidenced by the decades-long campaign for an Irish Language Act in the North. She added: 'I have written to the vice-president asking her to withdraw her remarks and to acknowledge the reality of Ireland's past. 'I would also like to welcome Leas-Uachtaran Kallas to Ireland to meet with campaigners, victims, and families affected by legacy issues. A visit like this would offer her a valuable insight into the historical injustices many are still fighting to address.' Ms Kallas' office has been contacted for comment.
