Weekly News Review - 3rd February 2023

Shell reports highest ever annual profits of $40bn

Oil and gas company Shell has reported annual profits of $40bn (£32m) for 2022, the largest in its 115 year history. The figure is double last year profits and comes as a result of the surge in gas prices caused by the Russian invasion of Ukraine.

Energy prices began to increase towards the end of 2021 due to a lack of European storage and low renewable output. This was exacerbated in 2022 by the conflict in Ukraine, which resulted in further price volatility as many EU countries reduced dependence on Russian gas.

As a result energy companies have benefitted from a significant increase in profits whereas households and businesses have seen a steep rise in energy bills. This has led to calls for the windfall tax to be extended to bring the UK in line with other European countries. Shell announced that it had paid just $134m in UK windfall tax in 2022, compared to £1.9bn in European taxes.

The Energy Profits Levy was introduced in May last year and acts as a windfall tax on the excess profits made by energy companies. The rate was initially set at 25% but was increased to 35% in November as profits continued to soar. However, there is an exemption in place for companies that re-invest some of their profits into UK energy projects.

Ed Miliband, shadow climate change secretary, said: “As the British people face an energy price hike of 40% in April, the government is letting the fossil fuel companies making bumper profits off the hook with their refusal to implement a proper windfall tax.”

He added: “Labour would stop the energy price cap going up in April, because it is only right that the companies making unexpected windfall profits from the proceeds of war pay their fair share.”

Liberal Democrat leader, Ed Davey, said: “No company should be making these kind of outrageous profits out of Putin’s illegal invasion of Ukraine. Rishi Sunak was warned as chancellor and now as prime minister that we need a proper windfall tax on companies like Shell and he has failed to take action.”

EU plans to loosen state aid rules to boost renewables investment

The European Commission have announced plans to loosen state aid rules in an attempt to boost investment in renewable energy projects. This is in response to US President Joe Biden’s $369bn Inflation Reduction Act which has reinvigorated the US renewables market.

Biden introduced his Inflation Reduction Act last autumn which has led to a large increase in new renewable projects. Reports estimate that the legislation could lead to a 40% reduction in US carbon emissions by 2030 compared to 2005 levels and Biden has hailed the act as “the biggest step forward on climate ever”.

There have been calls from European businesses and politicians for the EU to introduce a similar plan if they are to keep up with the US. However, the Financial Times has reported that many EU member states are divided over whether to introduce the new rules and how long for.

European Commission chief Ursula von der Leyen announced on Wednesday that state aid rules could be relaxed until the end of 2025 to allow EU nations to increase green investment. The plan will allow countries to draw from a €225bn funding pool which was left over from the EU’s €800bn post-pandemic recovery fund.

Von der Leyen said: “Major economies are rightly stepping up investment in net zero industries. What we are looking at is that we have a global playing field. We know that in the next years, the shape of the net-zero economy, and where it is located will be decided. And we want to be an important part of this net-zero industry that we need globally.”

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