Yesterday’s Financial Times includes an article by their Energy Editor, Ed Crooks entitled ‘Tax breaks to lure oil and gas sector‘. It reported that tax allowances of up to £160m per field will be made for developing an area west of the Shetland Islands that probably includes more than 2 billion barrels of oil.
Tax breaks on oil wells? What sense does this make? Oil companies are some of the richest on the planet, and subsidising them to drill is doubly stupid – in a world fast approaching (passing?) Peak Oil, this is foolish short-termism, and in a world that cannot afford to burn more than a small fraction of its remaining fossil fuels before it trips us into irreversible global warming, paying them extra to make sure it happens is simply bonkers.
So why are they doing it? It’s a hard region to develop, so if the UK government wants oil money to continue flowing into the economy, they have to bribe oil companies to bring it here. Hence the tax breaks.
It’s a characteristic environmental/resource problem that follows from a) the mass nature of many decision-marking processes (e.g., multiple nations and companies making related decisions in parallel) and b) the absence of effective overarching (e.g., global political or regulatory) systems capable of ensuring that the whole – the net impact of a mass of individually intelligible decisions – does not undermine the interests of us all.
And in this case, that is exactly what is happening: a hundred countries trying to attract investment for the sake of the employment, the tax revenues and the boost to GDP are collectively abandoning the responsibility for handing over a sustainable resource base to future generations and accelerating global warming. A thousand companies, all hungry for investment and struggling to maximise their returns, ravish the planet and resist even the most superficial controls.
But there’s nothing unique about the oil industry: we subsidise a huge range of damaging and short-term practices (e.g., airline flights through tax breaks and indifference to ‘externalities’). In fact governments and business have been ‘managing’ the economy between themselves for perhaps as long as there has been an ‘economy’ to manage. Monopolies, politically inspired subsidies, corruption are the normal practices of all major economies – all delivering short-term gains for state and business that destroy the long term interests of society. All that is new today is that these mechanisms are so powerful and so far of the leash that we are simultaneously creating an unprecedented threat to society’s very survival and abandoning every tool we once had to manage such a problem.