The U.K. petroleum industry has voiced its disappointment with the U.K. government's 1999 budget, under which taxes on transportation fuels will be increased in a bid to curb objectionable air emissions.
In a budget speech before Parliament on Mar. 9, Chancellor Gordon Brown introduced measures intended to reduce emissions of the greenhouse gas carbon dioxide.
"Our government's target," said Brown, "is to reduce greenhouse emissions by 12.5% by 2010. Today, I will announce a program of measures that will cut (annual) carbon pollution by 3 million metric tons."
Brown anticipates that a levy on the use of energy by business, to take effect in April 2001, will lead to a reduction of 1.5 million tons/year of carbon emissions.
This will be coupled with "significantly" lower rates of tax for energy-intensive industries in a bid to encourage them to improve their energy efficiency.
"Today," said Brown, "we are inviting them to submit their proposals. In pursuit of our policies for sustainable development, we will also allocate an extra £50 million ($80 million) to encourage business to invest in the new environmental technologies and in renewable fuels."
Other measures include tax breaks on low-sulfur diesel fuels, currently being introduced to meet European Union fuel specification changes, and to increase the duty on ordinary diesel and leaded gasoline.
On average, the increased tax will raise road transportation fuel costs by 6%, in line with government policy to raise fuel prices at more than the rate of inflation.
Industry responds
The U.K. petroleum industry appeared more disappointed with what was left out of the chancellor's plans rather than with what was included: Both the U.K. Offshore Operators Association (Ukooa) and the International Petroleum Exchange (IPE) expressed reservations.Ukooa complained that Brown missed an opportunity to recognize and respond to the depth of the difficulties currently facing the U.K. offshore oil and gas industry.
James May, Ukooa director-general, said, "Urgent measures are needed to halt the erosion of the U.K. oil and gas sector's international competitiveness in the face of the world oil price collapse over the last 12 months.
"In worldwide oil industry terms, the North Sea is a high-cost province. The chancellor's decision not to address the North Sea taxation issues is a major missed opportunity, and one that will lead, I fear, to further decline in exploration and development activity and job losses."
IPE bemoaned Brown's decision to include in the budget a measure designed to curb carbon pollution, without paving the way for an emissions trading scheme.
IPE Chief Executive Lynton Jones said, "This budget has identified some very specific targets for carbon emissions reduction, and it is not at all clear from the chancellor's speech how they will be achieved. A levy on the business use of energy was announced, but if this operates as a traditional tax, it is unlikely to be very effective in reducing emissions. It is high time for the government to heed the widespread calls for an emissions trading scheme and take action to bring this about."
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