The chancellor, Rachel Reeves, told a fossil fuel company the industry would receive a “quid pro quo” in return for higher taxes on its windfall profits, it can be revealed.
In a meeting with the Norwegian state energy company Equinor on 27 August, Reeves suggested that the government’s carbon capture, usage and storage (CCUS) subsidies were a payoff for oil firms being hit with a higher tax rate.
Minutes of the official meeting obtained by DeSmog and seen by the Guardian state that Equinor’s CEO, Anders Opedal, raised concerns over the energy profits levy – also known as the “windfall tax” – and “its impact on the value” of Equinor’s UK portfolio.
In response, Reeves said that raising the windfall tax from 35% to 38% was a “manifesto commitment”, but stated that “Equinor should recognise the quid pro quo – the funds raised enable government investment in CCUS etc”.
CCUS is the controversial practice of trapping the emissions produced by fossil fuel plants before they enter the atmosphere. Many scientific experts have suggested the technology is not economically viable. It is accused of being a favourite climate “solution” of the fossil fuel industry since it allows for the continued extraction of oil and gas.
The Labour government announced in October it would provide £22bn in subsidies to CCUS projects over 25 years after an increase in lobbying by the fossil fuel industry.
The Green party co-leader, Carla Denyer, said Reeves and the Labour government had been “caught out making promises in a secret exchange deal which goes against the interests of the British people”.
The MP for Bristol Central added: “In public, they claim to be taxing fossil fuel giants more fairly by raising the windfall tax, but behind closed doors they are giving back with dodgy deals to allow the fossil fuel corporates to continue with business as usual under the guise of CCUS – an expensive distraction and largely unproven technology.”
Equinor is one of the main companies investing in the UK’s CCUS sector. In December, the government signed deals with Equinor, BP and TotalEnergies to develop carbon capture facilities in Teesside. This will involve the development of the Net Zero Teesside power plant, which will be 25% owned by Equinor and aims to be the world’s first gas-fired power station featuring CCUS.
Earlier this year, Equinor had to retract a claim that it stores 1m tonnes of carbon dioxide annually at its flagship carbon capture project in the North Sea. Equinor has not captured 1m tonnes of CO2 per year at the site since 2001, and only captured a 10th of that figure in 2023.
Equinor made a $28.7bn (£21.2bn) post-tax profit in 2022 after Russia’s invasion of Ukraine triggered higher oil and gas prices – a figure that stood at $8.8bn in 2024.
Tessa Khan, the executive director of the campaign group Uplift, said: “Oil companies like Equinor have held sway over successive UK governments, for years shaping policies…
Read More: Reeves promised oil industry ‘quid pro quo’ over windfall tax in private
