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Osborne offers tax breaks for shale gas

  • @mjpmccarthy

Britain will seek to open up its potential reserves of the emerging but controversial fuel, shale gas, with a "generous new tax regime", the Chancellor has revealed, in a promise which has dismayed environmentalists.

The pledge reinforced George Osborne's aim of making a "dash for gas" the main thrust of Britain's future energy policy, raising more concerns that the Coalition was moving away from its promise of being the "greenest government ever".

Mr Osborne's Liberal Democrat coalition partners want to see the decarbonisation of the power sector – with the widespread use of renewables as the priority for the future. But in a private letter, which was leaked in the summer, Mr Osborne told the Liberal Democrat Energy and Climate Change Secretary, Ed Davey, that he did not want a fixed decarbonisation target for Britain. The issue, which splits the Coalition, will have to be decided before the Energy Bill is published next month.

Yesterday, Mr Osborne put a marker down to the Tory right and the climate-sceptic wing of his party with his pledge to spark a home-grown shale gas boom, as has happened in the US. "We're consulting on a generous new tax regime for shale gas, so that Britain is not left behind as gas prices tumble on the other side of the Atlantic," he told the Conservative Party conference.

Britain may have large reserves of gas in shale rock beds deep underground, but the means of exploiting them has generated criticism. The gas is released by hydraulic fracturing or "fracking" of the rock by pumping in water, sand and chemicals at high pressures. This has caused earth movements and prompted fears of ground water contamination.

Environmentalists have highlighted the safety worries, but their real concern about shale is that huge new volumes of carbon-based fossil fuels may come to the market in Britain.

Jim Footner, head of Greenpeace's energy and climate campaign, said last night: "Osborne needs to stop giving handouts to the gas industry and instead back his coalition partners and the CBI by supporting investment in renewable technologies."

Work on exploiting Britain's first major shale gas strike, made by Cuadrilla Resources, near Blackpool, a year ago, has been halted while a safety regime is drawn up, after the company accepted its activities had caused earth movements. It is likely to restart soon.

The Institute of Directors says shale gas reserves could create up to 35,000 jobs and meet 10 per cent of the country's gas requirements.

Gas lobby targets Damon film about fracking

A new Matt Damon film about the social consequences of fracking – hydraulic fracturing of rocks to release gas – may see moviegoers leafleted by the energy industry outside cinemas.

Promised Land is about a gas company trying to buy drilling rights in a small town. The producer, James Schamus, said: "We've been surprised at … what looks like a concerted campaign targeting the film even before anyone's seen it."

Will Coldwell