UK efforts to cut carbon emissions are ‘ineffective’

5 May 10
The costs of emitting carbon dioxide are unlikely to rise high enough to stimulate green energy production, despite a range of government climate change policies, research has found
By David Williams

5 May 2010

The costs of emitting carbon dioxide are unlikely to rise high enough to stimulate green energy production, despite a range of government climate change policies, research has found.

A study from the Centre for Economic Performance, based at the London School of Economics, also concluded that carbon taxes hit the poor hardest, as low-income groups spend proportionally more on fuel and energy-intensive goods such as food.

Report author Ralf Martin recommended a flat-rate cash handout for all UK taxpayers to counteract the effect.

He said such a ‘poll subsidy’ would ensure that carbon taxes functioned only as a deterrent to pollution. It would also help combat public scepticism about high taxes on emissions.

The UK has pledged to reduce its carbon emissions to 20% below 1990 levels by the end of this year, and by 80% by 2050.

However, it is likely to miss the first target. And, when ‘imported emissions’ caused by goods consumed in the UK but made elsewhere are included, the UK’s carbon footprint has actually expanded.

The April 30 study, Consensus on the long-run targets – but will we get policies that deliver?, also calls on the government to set a monetary value on CO2 emissions.

Martin said a high, stable minimum carbon price could be established through a universal tax on emissions, providing a vital incentive to business and industry to invest in more green technology and rely less on fossil fuels.

Ian Mulheirn, director of the Social Market Foundation, agreed that there were few incentives in the current system to encourage the UK economy to switch to renewable energy. He said a ‘poll subsidy’ could help overcome public opposition to a new tax. But he argued against government subsidies for green industry.

‘It’s a risky business to go around picking green winners,’ he told Public Finance. ‘The reason why green technology isn’t flourishing is that there’s no guarantee that the carbon price will be high enough to make that investment worthwhile. What that industry needs is some certainty on that – and that’s what a tax would give.’

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