"Grotesque" oil profits prompt renewables demands

As Royal Dutch Shell today announced third quarter profits of £6.6bn, environmental groups added their voices to those of Labour backbench MPs and unions calling for a windfall tax on the profits of oil giants to fund investment in carbon emission reduction initiatives.

The calls began yesterday after BP announced record profits of £6.4bn incensing MPs such as John Mcdonnell, who branded the results "grotesquely obscene profiteering".

His criticism was echoed today by Friends of the Earth, which called on the government to introduce a windfall tax on oil companies to fund renewable energy, public transport and energy efficiency programmes.

"The government must introduce a windfall tax on vast oil company profits and invest the money in green initiatives," said Friends of the Earth campaigns director Mike Childs. "Oil is an expensive, dirty and finite resource – we need a green industrial revolution to lead us to a safe and prosperous future."

Both companies defended their profits, arguing that they are among the biggest taxpayers in the UK and are committed to investing in renewable energy projects.

The record profits were achieved largely as a result of the high price of oil over the summer, which at one point reached $147 (£89) a barrel. "Although it has since fallen away sharply, the high oil price of the third quarter obviously helped our absolute result," said BP chief executive Tony Hayward.

Meanwhile, Shell argued that calls for a windfall tax ignored the fact that the company has quadrupled its spending on renewable energy projects in the past year. "Shell has spent more than $1bn in the past five years on carbon capture, biofuel and solar and wind energy projects," added a spokesman.

Similarly, BP said it will have invested $1.5bn in renewable energy by the end of 2008, double the amount it invested in 2007.

In a speech last month, Catrina Landis, chief operating officer for BP Alternative Energy, said the company remained committed to the renewables sector. "We are here [in renewable energy] because we see a good business opportunity," she said. "We continue to monitor the market closely to ensure we can identify the next large opportunity for BP."

In related news, Shell announced today it will delay further investment on its Athabasca oil-sands project in Alberta because of rising local construction costs, falling oil prices and the global financial crisis.

The move is likely to be welcomed by green groups, who have been campaigning against the expansion of so-called unconventional oils extracted from tar sands, which are expected to have a carbon footprint between three and eight times greater than conventional crude oil.