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Tilting at windfall taxes (part 2)

www.energyflux.news

Tilting at windfall taxes (part 2)

UK government’s bid to claw back profits is riven with dubious trade-offs

Seb Kennedy
Jun 8, 2022
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Tilting at windfall taxes (part 2)

www.energyflux.news

“The energy industry is often painted as the villain, but clawing back excessive earnings made at the expense of consumers is easier said than done.” – Energy Flux, January 2022

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These are extraordinary times, with the energy world whipsawing from unprecedent pandemic-era blood-letting into a troubled new wartime era of structural shortages, higher prices, frenzied profit-making and profound investment uncertainty. The political response – to redistribute excessive profits to fund consumer subsidies at a time of deep crisis – has an economic and moral logic to it. But windfall taxes are rarely a good idea. They are an admission of failure to adequately regulate a free market. The British government’s attempt to reset the risk-reward balance pursues short-term political objectives at the expense of longer-term investment certainty — at the worst possible time for the energy transition.

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Populist pressure to take action against headline-grabbing energy profits has been mounting for months. The UK Treasury finally caved and imposed an immediate 25% surcharge on “extraordinary” oil and gas profits on 26th May.

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