By Shadia Nasralla

LONDON (Reuters – Britain’s windfall tax scheme for oil and gas producers, worth 5 billion pounds ($6.29 billion), includes an incentive for producers to use more fossil fuels. It angers climate activists who called for this tax.

Higher investment in oil-and gas projects can reduce tax bills and the 25% additional levy for producers.

The Treasury of the UK announced that a “super-deduction” style relief was being implemented as part of the levy to encourage investment in UK oil and gas extraction. Other types of energy investments, like in electric cars charging or renewables, were not listed by the Treasury.

According to the Treasury, “The new… Investment allowance will allow businesses to get an overall 91 pence reduction in tax for every 1 Pound they invest.”

Britain’s government pledges to be a carbon-neutral country by 2050. Last year, it hosted the COP26 climate summit. This conference urged nations to end inefficient fossil fuel subsidies.

It also declined invitations to be part of other oil- and gas-producing nations’ efforts to prohibit new extractions.

The announcement on Thursday of an extra tax on oil producers was accompanied by a tax incentive to increase production. Climate activists were not happy with this policy.

Ami McCarthy, a political activist for Greenpeace UK, stated that “rewarding oil-and gas extraction while doing nothing in support of investment in renewables won’t provide energy security and push bills even higher, and pour fuel all around the climate crisis.”

Steve Trent, the founder of Environmental Justice Foundation said that the tax is a good step in helping households deal with increasing energy prices.

There is however a loophole. He said that oil and gas companies can avoid most of the levy by investing more in extraction in the UK.

($1 = 0.7952 pounds) Graphic: UK government revenue from oil and gas sector UK government revenue from oil and gas sector, https://graphics.reuters.com/BRITAIN-OIL/TAX/akpezrnzavr/chart.png Graphic: Britain’s biggest oil and gas producers, https://graphics.reuters.com/BRITAIN-OIL/zdvxowamwpx/chart.png