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Last Updated: Thursday, 9 February 2006, 23:47 GMT
Climate 'makes oil profit vanish'
By Richard Black
Environment Correspondent, BBC News website

BP logo at petrol station.  Image: AP
Oil profits ignore the costs of climate change, says Nef
The huge profits reported by oil and gas companies would turn into losses if the social costs of their greenhouse gas emissions were taken into account.

That is the conclusion of research by the New Economics Foundation (Nef).

Nef found that the 10bn-plus profits just reported by Shell and BP are dwarfed by costs of emissions associated with their products.

Nef also suggests UK Treasury revenues from oil and gas may be a disincentive to curbing greenhouse gas emissions.

The comments come in an article for The Green Room, the BBC News website's weekly series of opinion pieces on environmental issues.

Reporting previously undisclosed figures, Nef's policy director Andrew Simms writes: "Our new calculations from research in progress with WWF, based on Treasury statistics, show that UK government income from the fossil fuel sector - conservatively estimated at 34.9bn ($61bn) - is greater than revenue from council tax, stamp duty, capital gains and inheritance tax combined.

"Policies aimed at reducing carbon emissions could therefore have a major impact on the government coffers; a serious disincentive to action."

Profits into loss

But, Nef concludes using more government figures, this revenue does not reflect costs associated with climate change resulting from burning oil and gas.

Green Room logo

A report prepared for Defra and the Treasury estimates that each tonne of carbon dioxide emitted costs about 20 ($35) in environmental damage.

"Combining the emissions that stem from BP's direct activities and the sale of its products leads to 1,458m tonnes of CO2-equivalent entering the atmosphere, with a damage bill of 29bn ($51bn)," writes Andrew Simms.

"Subtracting that from the 11bn ($19bn) annual profit it has just reported puts it 18bn ($31bn) in the red; effectively bankrupt.

"The same calculation puts Shell 4.5bn ($8bn) in the red, even as it reports an annual profit of 13bn ($23bn)."

Both Shell and BP contend they are investing in renewable energy schemes and other initiatives to reduce greenhouse gas emissions.

Like other members of the European Union, Britain is signed up to the European Emissions Trading Scheme, which aims to reduce greenhouse gas production from industry.

But Tony Blair, along with other European leaders, has been accused by environmental groups of having no policies to reduce emissions from transport, the principal user of oil.

Earlier this week the RAC Foundation suggested a major hike in vehicle excise duty for petrol-thirsty cars.

Nef believes the government has to link its commitments to poverty reduction into domestic policies on energy use and climate change.

Otherwise, it warns, the world's poor will suffer, being less able to afford energy as prices rise, yet the most vulnerable to impacts of climate change.


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02 Feb 06 |  Business
Climate report: the main points
30 Jan 06 |  Science/Nature
Contempt case for Shell over gas
24 Dec 05 |  Science/Nature
Climate: What science can tell us
27 Jul 04 |  Science/Nature

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