A think tank led by former Labour prime minister Tony Blair has called for the government to rethink the Energy Profits Levy.
Tone Langengen, who is the senior policy adviser for climate and energy policy at the Tony Blair Institute (TBI), has said high taxes on profits linked to fossil fuels means ministers take a "political hit" but does not result in any benefits for the climate.
The institute has previously made the case for the government to set aside its 2030 green targets, arguing the net zero push led by Ed Miliband is "doomed to fail".
After originally being introduced when energy prices were sent through the roof due to the war in Ukraine in 2022, the EPL or "Windfall Tax" has remained in place and been increased despite oil prices rarely lifting above $70 a barrel.
The fiscal regime has had catastrophic consequences for the North Sea and and Aberdeen as firms has fled the basin in favour or more favourable opportunities overseas.
Failure to fully utilise oil and gas assets at home while there is still the demand only results in reliance on oil and gas from abroad, with more emissions from transportation, weakened energy security and no tax receipt or employment benefits.
Politico reports that, asked about the EPL, Langengen said: “There is no reason why we should shut off future revenue when it has no, kind of, climate benefits."
With the Windfall Tax creating an effective 78% tax rate, Rachel Reeves snubbed industry calls for the levy to be removed before 2030.
According to forecasts from The Office for Budget Responsibility, the tax intake from the North Sea is set to collapse from £2.7billion in 2025/26 to just £300million by 2030/31.
Lanengen explained that the EPL is a "a good example of where increasing taxes too much means it [the Treasury] gets less”.
She continued: “You’re then basically taking both a kind of fiscal hit and you’re taking a kind of political hit with the workers who [are] affected … for what I can see is no climate gain whatsoever."
An earlier TBI report from October said the Windfall Tax, along with the ban on new exploration licenses, had "driven capital out of the basin".
A government spokesperson said: “We’re giving the sector and its investors the long-term certainty to plan, invest and support jobs with plans to replace the Energy Profits Levy when it ends by 2030, or earlier if its price floor is triggered.”
Read the full story on the Politico website.