BP Amoco leans towards tradeable emission permits

In a significant deviation from the oil and chemical industries' usual line, the president and deputy chief executive of BP Amoco, Rodney Chase, has indicated that the company could support energy taxes. However, he added that he would prefer a system of tax breaks for firms that reduce their emissions.

The process industries, traditionally energy intensive, have always been among the strongest opponents of energy taxes, arguing that they are already the most heavily regulated of industries and that further taxation could only damage their competitiveness. However, with the European Commission and parliament leaning towards the use of financial instruments to limit industrial emissions, the industry is now softening its stance.

Chase, addressing the left-wing Fabian Society, said that he accepted there was `a limit to what firms would voluntarily do to curb their energy emissions', and that energy taxes `can undoubtedly be a powerful instrument for changing behaviour.' Chase said that he would rather see a system of emissions trading and tax incentives, rather than one of charges based on energy use.

According to Chase, `taxes' as such have only one purpose - to raise money for governments. But an energy tax would need to change behaviour, and would therefore only be effective if it gave companies a choice between options. Moreover, he argued, an energy tax would not address the real problem - the volume of CO2 emissions - and would also ignore other greenhouse gases. Tradeable emission permits would allow the problem to be tackled far more effectively, he said.

Chase also proposed that companies who reduced their overall emissions should be eligible for rebates in corporation tax. This would replace a proposed scheme whereby the costs of an energy tax would be offset by reductions in employers' National Insurance Contributions. Chase claimed that the latter option would create `a fiscal bias against investment- and capital-intensive industries.'

The EC is considering a report from British Airways chief Lord Marshall, which broadly supported the use of economic instruments. Speaking at the Chemical Industries Association's recent investment intentions conference, Marshall suggested that a pilot scheme for emissions trading in the UK, involving a few interested firms, could begin as early as next year.