Ending the tax relief claimed by fossil fuel giants would raise £22bn over the next six years, according to a report by the New Economics Foundation (NEF).
The think tank said shutting the loophole could pay for an emergency insulation programme for 3.31 million of the leakiest homes across the UK.
The NEF said spending £3.6bn of the money raised from an expanded windfall tax on insulating the least energy-efficient homes – bands D and below – would save each of those households £336 a year.
Oil giant Shell revealed in October that it had avoided paying anything under the windfall tax due to an investment allowance “loophole” created to encourage further North Sea exploration.
Campaigners said it was time for Rishi Sunak’s government to end the loophole and raise extra funds for an energy-efficiency drive and more targeted support for families struggling with soaring gas and electricity bills.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Millions of people are now condemned to facing the misery of living in cold damp homes this winter – but these calculations show that these are political choices.”
The report produced by the NEF for the Warm this Winter coalition – which includes the End Fuel Poverty Coalition, Possible and Green Alliance groups – also called on the government to boost renewable energy.
If the government helped triple the capacity of onshore wind, offshore wind and solar by unblocking planning constraints, it would lead to £28.5bn of savings in the UK’s energy costs by 2025, the study found.
Emmet Kiberd, an economist at NEF, said allowing more renewable projects would “boost growth, create jobs and help us meet our national net zero commitments, and could be fully funded by making oil and gas firms pay their fair share in windfall taxes”.
Mr Sunak has imposed a de facto ban on onshore wind development – though dozens of rebel Tory MPs have signed an amendment urging the prime minister to change course and allow new projects.
The row over energy policy follows chancellor Jeremy Hunt’s autumn Budget announcement that the windfall tax would be hiked from 25 per cent to 35 per cent and extended for two years until March 2028.
Mr Hunt also tightened the rules around the investment allowance so oil and gas firms can only cut their windfall tax bill by 29 per cent of the amount invested in new extraction, down from an 80 per cent discount.
But the NEF said the rules still allowed fossil fuel companies to claw back more than 91 per cent of their capital investment in the form of tax relief – allowing to keep at least £22bn over the six years to 2028.
Earlier this week, Labour estimated that closing the loophole in the windfall tax could raise at least £17bn by 2028. Both Labour and the Liberal Democrats have tabled amendments aimed at forcing the government to set out how much each company is paying under the levy.
Anti-poverty and environmental groups are staging a day of action on fuel poverty across the UK on Saturday as part of the Warm this Winter campaign – including a rally to be staged in London’s Parliament Square.
New polling by YouGov for the campaign shows 15 per cent of vulnerable people – those with a medical condition, disability, aged over 65 or with a child under the age of seven in the home – have effectively “self-disconnected” by massively reducing their energy supply.
Almost a quarter (22 per cent) of vulnerable people say they are now living in cold, damp homes. A further survey by Survation for the campaign found that 85 per cent of people in the UK support a windfall tax as a way of investing in insulation and lower energy bills.
Alethea Warrington, campaigns manager at climate charity Possible, said: “Getting off gas for good with renewable energy would cut energy bills and emissions, helping us to build a safer future for all.”