- Britain has made impressive progress on decarbonisation – but
the most painful part of the process lies ahead
- The consensus behind Net Zero could fracture if
decarbonisation is perceived as unfair, or if it raises costs for
consumers excessively
- Evidence shows that market mechanisms such as carbon pricing
have been successful at delivering decarbonisation cost
effectively
-
‘Pricing Pollution
Properly’ calls for the Government to move towards an
upstream carbon tax, pruning the current thicket of subsidies
and regulations with a simple and powerful incentive to
decarbonise
- This would involve no increase in overall taxation, with all
the revenue raised returned to people’s pockets via a carbon
dividend
The Government has made reaching Net Zero one of its core
priorities. But for all the ambitious target-setting, the UK is
still lacking in terms of concrete policies which will do the
job.
In a new report, the Centre
for Policy Studies urges the Prime Minister to reform and expand
carbon pricing to ensure polluters are paying for the damage they
cause, and to ensure that decarbonisation is done in a fair and
responsible way.
‘Pricing Pollution
Properly', written by Eamonn Ives with a foreword by
Stanley Johnson, notes how carbon pricing in the waste management
and electricity generation sectors have been powerful
decarbonisation tools, with emissions falling far more quickly
than the economy as a whole.
However, the think tank warns the Prime Minister not make
decarbonisation more expensive than it needs to be, or
unpalatable for hardworking taxpayers. Policies to cut emissions
must be cost-effective, and they must be fair, and carbon pricing
offers a way of doing this.
Recognising that levying a carbon tax on carbon emitting
companies will drive up operating costs, and therefore ultimately
the cost to consumers, the CPS also recommends additional
measures to mitigate any potentially regressive impacts of the
carbon tax.
These could include a system of carbon dividends to rebate
money back to citizens as cash; a carbon border adjustment
mechanism (CBAM) to safeguard against the possibility of carbon
leakage and retain a level playing field between domestic and
foreign goods; and providing support for British innovators who
are researching and developing the clean technological solutions
to deliver a less carbon-intensive economy. It would also be
important to introduce the tax in stages, to allow time to adapt.
Eamonn Ives, report author and Head of Energy
and Environment at the Centre for Policy Studies, said:
‘Alongside levelling up, decarbonising the economy is a core
priority of the current Government. Ensuring such targets are
reached successfully will require a suite of new ideas and
actions, across a range of policy areas. Carbon pricing and
similar mechanisms have huge potential to achieve environmental
goals, by putting the onus on to polluters to clean up their
act.
‘By extending the reach of carbon pricing to more of the UK
economy, sectors which have lagged behind those that have made an
outsized contribution to decarbonisation in recent decades
should begin to catch up, as they must if the UK is
to meet Net Zero.
‘Carbon-pricing is a market-based mechanism with a proven
track record of success, and as the UK looks to host COP26, it
should think about how it can emphasise the role of carbon
pricing in its plans to stop climate change.’
In his foreword to the report, Stanley Johnson,
said:
‘If anyone is in doubt as to the practical importance of
applying the Polluter Pays Principle, I suggest they read Eamonn
Ives’ report for the CPS on Pricing Pollution Properly.
‘Mr Ives outlines with great clarity the urgency of applying
the polluter pays principle to the carbon sector and the immense
potential carbon taxes have as a tool for ensuring that the UK
meets its stated climate goals, including both near and
longer-term objectives.’
Phil
Levermore of the Ebico Trust, said:
'Eamonn’s timely report for
the CPS makes clear the difficulties of implementing national
Net-Zero policies without disproportionately burdening lower
income households. His recommendation of an upstream carbon
tax, redistributed in the form of a flat ‘Net Zero Dividend’
across the whole population, is an important initiative which
would see carbon emissions reduced whilst mitigating the
financial impact on poorer consumers.'
