The president of Cop26 has called for an increased windfall tax on energy companies following BP’s bumper profits.
Alok Sharma tweeted that the country needs “to raise more money from a windfall tax on oil and gas companies and actively encourage them to invest in #renewables”.
His comments come after BP announced it had more than doubled its third-quarter profit from a year earlier to $8.15 billion on the back of soaring energy prices caused by Russia’s war against Ukraine.
BP said it expects to pay about $2.5bn in taxes for its British North Sea business this year, including $800 million in a windfall tax.
Shell admitted recently it had paid no windfall tax at all, despite a $30bn profit so far this year, after taking advantage of a loophole that exempts companies that invest in boosting oil and gas extraction.
Mr Sharma has called for a change in the way the windfall tax works to prevent companies from using loopholes.
Last week he told The Guardian: “These excessive profits … they have to be treated in the appropriate way when it comes to taxation.
“We ought to be going further and seeing what more can be done in terms of raising additional finance [from the profits]. So far, at least, the level of money raised is obviously not significant.”
US President Joe Biden on Monday called on major oil companies who are bringing in big profits to stop “war profiteering” and threatened to hit them with higher taxes if they do not increase production.
BP paid $5bn in tax around the world during the most recent quarter at a rate of 37 per cent, chief financial officer Murray Auchincloss told Reuters.
Mr Auchincloss would not comment on Mr Biden's remarks, but said BP is increasing the number of drilling rigs in the Gulf of Mexico and shale basins to boost output.
BP's shares have gained more than 45 per cent this year, buoyed by stronger oil and gas prices, but they have trailed gains by Shell and US rivals Exxon Mobil and Chevron.
The company has said it will buy back $2.5bn of shares after repurchasing $7.6bn so far this year. It has committed to using 60 per cent of its excess cash flow for shareholder returns.
Shell also said it would buy back another $4bn in shares over the next three months, bringing the total repurchases for the year to $18.5bn.
The top five western oil and gas companies paid out a record $29bn in dividends and share buybacks in the third quarter, calculations by Reuters showed.
“Can’t believe I have to say this, but giving profits to shareholders is not the same as bringing prices down for American families,” Mr Biden tweeted in response to Exxon’s announcement of its dividend increase.
British Prime Minister Rishi Sunak has said all options are on the table as he attempts to fill a £35bn ($40.7m) budget shortfall in the UK economy.
Mr Sunak and Chancellor Jeremy Hunt are reportedly also exploring tax rises and public spending cuts worth up to £50bn ($57.84bn) a year to fill the hole in public finances.
Cop27 will begin on Sunday in Sharm El Sheikh, Egypt.