Electricity generated by wind farms and nuclear power plants could be exempted from a proposed windfall tax being proposed by British Chancellor Rishi Sunak.
The windfall tax is set to be imposed on profits generated from North Sea oil and gas production in an attempt to raise about £5 billion ($6.3bn) to help to support residents struggling with rising energy bills.
The tax will help to pay for £15bn of support for consumers’ energy bills, £400 for each household, more for low-income people.
However, the initiative has attracted criticism from renewable energy producers.
Mr Sunak is now reportedly looking at restricting the windfall tax to energy produced from fossil fuels.
A source told The Telegraph newspaper Mr Sunak has been consulting business leaders on proposals to avoid “impacting sectors of the economy where we need hundreds of billions of pounds of investment”.
Last month, trade bodies, including RenewableUK, wrote to Mr Sunak about their concerns.
“A windfall tax would have a detrimental impact on investors in clean energy and it is a mechanism which fails to recognise the complexity of the generation market,” they said.
Chair of the government's Net Zero Scrutiny Group, Craig Mackinlay, has heavily criticised the move.
"To charge energy companies a windfall tax would put them off business here in the UK and not set a good example," he said.
Business leaders have also said the increase from 40 per cent to 65 per cent on tax for energy companies, which will last until December 2025, will damage the economy.
"This is a disappointing and worrying development for industry, the shock waves of which will be felt in offshore energy jobs and communities, and by consumers, for years to come," said Deirdre Michie, chief executive of Offshore Energy UK, the representative body for the oil and gas industry.
Mr Sunak has insisted the levy fairly taxed the "extraordinary" profits of energy companies.
"The oil and gas sector is making extraordinary profits, not as a result of recent changes to risk taking or innovation or efficiency, but as a result of surging global commodity prices, driven in part by Russia's invasion of Ukraine," he said.
"It is possible to both tax extraordinary profits fairly and incentivise investment. And so, like previous governments, including Conservative ones, we will introduce a temporary, targeted energy profits levy."
