Windfall tax on utilities could distract from focus on the green economy

Not the same as oil and gas

clock • 3 min read
David Osfield of the EdenTree Responsible & Sustainable Global Fund
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David Osfield of the EdenTree Responsible & Sustainable Global Fund

The news that the UK government is potentially gearing up to extend UK windfall taxes to utilities companies may well be a popular move among voters, but it presents a real risk of undermining the long-term investment framework required to encourage the deployment of capital in renewable energy solutions.

While there is a clear need to address energy-led inflation, an intelligent framework can support voters' need to pay higher bills at the same time as tackling the climate crisis and transitioning the UK economy from a reliance on thermal generation to renewables. The two are not mutually exclusive.  The spectrum of commentators on energy windfall taxation is wide: from those that think it a necessary tool for redistributing excess energy profits to those that believe windfall taxes disincentivise investment and further complicate tax policy. Policymakers are also presented with an unenv...

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