The Government must introduce a windfall tax on huge oil company profits and use the money to fund a comprehensive programme to improve the energy efficiency of people's homes, and scale up investment in alternative energy sources, such as renewables, Friends of the Earth said today. Earlier today Shell announced profits of 27.6 billion US dollars (13.9 billion) in 2007 - a record for a UK company.

The environmental campaign group also urged Shell to shift the balance of its investments and put more of its huge financial resources into helping create a sustainable economy.

Friends of the Earth director, Tony Juniper said:

“Shell is making vast profits from its climate changing activities. The Chancellor must introduce a windfall tax in his March Budget, and use the money to improve energy efficiency in people's homes. Such a scheme would benefit the millions of householders who can't afford to heat their homes, save people money and help tackle climate change. It would also reduce the UK's reliance on imported oil. The Government must show that it means business on climate change.

“A tiny fraction of Shell's investment is going into renewables. It must do more to tackle climate change by investing more of its vast resources in helping to develop a low carbon economy, and cleaning up the impact of its activities both at home and abroad.

Notes

A windfall tax is needed to help correct the perverse incentives created by high oil prices. The price of crude oil encourages investors in petroleum companies to put pressure on companies like Shell to invest even more of its assets in oil, as the financial return is so high. Renewable power, in the short term, cannot gain the level of profitability of oil and this market failure is helping to increase carbon dioxide emissions. A windfall tax would both send a financial signal to investors as well as provide potentially massive resources to help cut emissions.