Fracking Needs Local Incentives

Another week, another big call for energy policy.  Following last week’s Energy Bill, it is time for Ed Davey to point the way on the use of unconventional gas supplies.  He will give fracking the green light following the George Osborne’s Autumn Statement which is widely expected to include tax breaks for the companies experimenting with the process.

Fracking is another of the unjust energy solutions that realises possible long term benefits for the nation while concentrating risks within a local population.  Politically it’s the underground equivalent of onshore wind, though for all the thundering protests against wind turbines, a wind farm has yet to cause an earthquake.

There are a number of known unknowns about fracking – how much gas is accessible, how will the process work in a concentrated population –  but one thing is clear, locals will object.  If the technology is to be of any short term interest for the UK therefore, the Chancellor must be creative in his tax package.  The fracking regime must learn lessons from onshore wind.   Specifically the Chancellor could provide for measures that direct cash back into the relevant local community.  This could be partially achieved through the government’s proposal to share business rates with local councils.  However there is a danger that the costs-benefits of fracking would not be properly managed through rates, as companies could open operations in different parts of the country that could disperse rates income far more broadly than the local risks, even after accounting for the local retention.  Also it is not clear how this scheme would work in Wales – a major concern as the Vale of Glamorgan is one of the the areas ear-marked for shale gas exploration.

The clash of planning laws and energy policy has been a torrid battle ground for communities across the UK for many years.  Osborne and Davey need to think creatively to ensure that the right package of support, regulation and locally distributed incentives is delivered to ensure that domestic shale gas becomes a safe and viable addition to our energy mix.

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