Global Policy Forum

UK Needs Carbon Tax Not Energy Tax


By Anna Jagger

Chemical News & Intelligence
June 16, 2000

The UK government's proposed climate change levy should be replaced by an upstream tax on the carbon content of fuels, according to the Royal Commission on Environmental Pollution (RCEP) in a report calling for a 60% cut in carbon dioxide emissions over the next 50 years.

In its report, published on Friday, the government-funded body said it favoured a carbon tax on fossil fuels, based on the carbon dioxide produced, because it would encourage a shift to low-carbon and non-carbon energy sources.

In addition, such a tax would lead to an increase in the average cost of energy which would bring about some reduction in consumers' use, partly by increasing the attractiveness of energy saving measures and equipment, the Commission said.

Government proposals for a climate change levy are "mistaken", it said, because they amount to an energy tax rather than a carbon tax, and because they do not cover domestic use of energy.

"If the climate change levy is to be introduced, it should be seen as an intermediate stage in the introduction of a carbon tax," the Commission stated.

Such a carbon tax would be applied upstream, and should cover all fuels, it said. "Applied upstream, when the fuel is initially purchased, it would give all companies converting and distributing energy an incentive to do so more efficiently, as well as giving energy consumers an efficiency incentive, because some of the costs of the tax would be passed on."

The government's planned climate change levy is due to come into force in April 2001 and apply to almost all use of gas, coal and electricity outside the household sector.

In today's report, the Commission called for a 60% reduction in carbon dioxide emissions by 2050. It described the government's goal of a 20% reduction in emissions by 2010 as "a major step in the right direction" but expressed doubts whether this goal can be achieved using the current proposed measures.

"The UK lags far behind many other European countries in developing the renewable energy technologies that will become much more important in future, and in the very inefficient ways heat is supplied to homes," it said.

Key recommendations in the report include: Quadrupling government support for energy-related R&D to bring it in line with the present European Union (EU) average. A fundamental review of the financing, management and regulation of electricity networks to encourage renewable energy sources and combined heat and power (CHP) plants, serving whole neighbourhoods or even individual houses. Creation of a 'sustainable energy agency' to boost energy efficiency in all sectors and link that to the rapid development of renewable energy sources. A long-term programme to cut considerably the energy used in buildings of all types.

RCEP is an independent body, appointed by the Queen and funded by the government, which published in-depth reports on environmental issues.



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