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Time For A UK Carbon Tax?

July 19, 2020

By Paul Homewood

 

 An argument for carbon taxes from CAPX.

(I should point out that Rachel Wolf acts as the secretariat for the Zero Carbon Commission, which includes Adair Turner and Bryony Worthington amongst its Commissioners. More worryingly, she co-wrote last year’s Conservative manifesto)

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There’s a belief shared by many of us lockdown parents that Disney has (accidentally) timed its entry into streaming services perfectly. Success was more-or-less guaranteed by the closure of schools around the world. Sure enough, desperate mums and dads flocked in their millions to hand over their credit card details.

In policy and political terms, the same can be said for “carbon charging”. 

As we explain in the Zero Carbon Commission’s latest report, a carbon charge requires people who produce, distribute, or use fossil fuels, or whose activities result in other types of greenhouse gas emissions, to pay for every tonne of greenhouse gases that enter our atmosphere. This incentivises them to switch to another, lower emissions alternative.

It is an idea long proposed in principle, then dismissed because of its electoral impossibility.  But as we emerge from the dark shadows of Covid-19, the conditions have never been better. Carbon charging could make a huge contribution to our ability to reach Net Zero by 2050 without kneecapping the economy, or relying on implausible levels of competence and foresight from regulators. It is also possible to implement with public consent.

First, both the Government and the public are enthused by the idea of a green recovery, more so than a return to the ‘norm’. Covid-19 has clearly made the public more aware of, and more sympathetic towards, the environment around them. This is supported by our polling – perhaps surprisingly, the majority are prepared to sanction a slower recovery if it is a greener one.

Second, we need policy substance to back up the Prime Minister’s impressive rhetoric around the creation of new green jobs and the transition to Net Zero. This needs to bake the right investment signals into the market: a carbon charge would tell businesses and investors where to place their money, and provide fresh employment opportunities in new sectors.

Third, and perhaps counter-intuitively, the kind of carbon charge that the Zero Carbon Commission are proposing could cut red-tape for both consumers and businesses – something Boris Johnson enthused about in his speech yesterday. We already have some carbon pricing in the UK but it is opaque, and mostly piled sequentially on top of electricity bills. This is perverse – electricity is the sector we most want to grow as we decarbonise the grid and electrify cars, ships, and planes. Under the current pricing system, Industry often has several reporting systems and multiple bills to pay. Our proposed model represents clarity and simplification. It will also cover more of the economy.

Fourth, voters accept that taxes are going to have to go up to pay for the billions that have been spent on furlough and supporting businesses through lockdown. They are also broadly in agreement that, if taxes have to rise, then you may as well do something positive about the environment in the process.

Lastly, the Government needs something big and bold to announce ahead of the COP26 summit that it is hosting in Glasgow next year. The Prime Minister wants to be able to go to the summit and point to a substantive policy intervention that he can call his own.

The fact is, introducing a carbon charge would not be truly revolutionary. Other countries, most notably in Europe, are ahead of the UK. Germany and Denmark announced carbon pricing policies during Covid-19. Ireland has doubled down on theirs. But this too represents an opportunity: we can learn lessons from these systems and make ours, as ministers are fond of saying, “world-beating”. 

After all, many a naysayer said that Disney did not have it within itself to launch a successful streaming service. It was too late to the party, they said – it was too far behind Netflix, Amazon and the others. How wrong they were.

Just like Disney in 2018, the Government cannot afford to twiddle its thumbs any longer: the improbable set of conditions that would allow for the introduction of a successful and popular carbon charge could soon dissipate. As the Prime Minister said yesterday: “Covid has taught us the cost of delay.” He is right.

https://capx.co/now-is-the-disney-moment-for-a-uk-carbon-charge/ 

 

Her article, far from justifying a carbon tax, highlights why one would be such a bad idea.

Let’s get straight to the quick.

As the writer makes clear, a carbon tax will be used to raise revenue, which scotches the usual defence that the money raised will be repaid as tax credits in another form.

A carbon tax would have the inevitable effect of pushing up energy and fuel bills in a most regressive way. This would not only be the worst possible way to raise revenue, but would go down like a lead balloon with the public at large.

Wolf talks about polling showing people want a green recovery. People say all sorts of things in polls, but that does mean they are actually prepared to put their money where their mouth is.

Worse still, people won’t even see any tangible benefit from higher taxation. They might accept higher taxes if they were used to employ more nurses and police. They certainly won’t if the money raised is spent on green flim flam.

Wolf’s commentary also includes plenty of other false assumptions.

For instance, it is not true that a carbon tax would reduce bureaucracy. Quite the opposite, if companies are expected to assess how much they are paying, and on what. The whole idea, after all, is to encourage a switch to low carbon alternatives, so firms would need to know potential carbon tax savings.

There is also the question of international competitiveness. We are clearly nowhere near a global tax, and in my view never will be. Any domestic carbon tax would simply make our industries less competitive.

Interestingly, of course, we already have one very significant carbon tax – fuel duty. But has this had any effect on reducing fuel consumption or encouraging a move to electric cars? The evidence suggests otherwise. People still need to drive, so demand tends to be very inelastic – higher fuel prices do very little to reduce demand.

Equally, despite the swingeing level of fuel tax, sales of electric cars remain miniscule. despite the massive subsidies on offer for them.

I strongly suspect that pushing up household energy bills will also have a negligible effect in either reducing usage or encouraging adoption of low carbon alternatives, such as solar panels, heat pumps and insulation.

 

Wolf talks about the creation of green jobs, but it well established that “new green jobs” merely destroy more jobs elsewhere in the economy. If renewable energy and other low carbon technologies really are cheaper and more efficient, as we are continually told, they will quickly establish themselves in the market, without the need for taxation of competing technologies.

The last thing the UK economy needs, when it is battling its way out of the current crisis, is to replace cheap, reliable energy with expensive, impractical alternatives.

 

She finishes by referring to COP26. Whether Britain emasculates itself with a carbon tax or not, China, India and indeed most of the world outside of Europe will carry on with business as usual.

Surely we have learnt this lesson by now? One of the main planks of the UK Climate Change Act was that it would encourage other countries to follow suit. We have found out to our cost since that this was mere wishful thinking.

45 Comments
  1. CheshireRed permalink
    July 19, 2020 11:44 am

    Paul, your logic and evidence-based rationale outclasses these carbon clowns at every turn. Sadly it’ll be to no avail, as we’re destined to be ruined by Green Blob loons whether they be green, red, yellow or worst of all, blue.

    Parliament really IS stuffed with eco-lunatics everywhere, and we’re all going to pay the price.

  2. Mad Mike permalink
    July 19, 2020 11:50 am

    I think you’ve covered it all Paul but “electrify cars, ships, and planes.” ? Surely she jests.

    This is opportunistic lobbying. We all know that taxes will be much higher for a long time and she hopes that introducing this tax now will creep in un-noticed by the general public. If this tax was so widely welcomed by those that she polled surely she would want to shout about it from the rooftops.

  3. Bloke back down the pub permalink
    July 19, 2020 11:52 am

    So, I’m enthused with the idea of a green recovery? Who knew?

  4. Alan Fields permalink
    July 19, 2020 11:56 am

    this is ludicrous, I am glad I live outside UK
    Petrol here vhas now gone up to 22pence per litre, oh woes

  5. Graeme No.3 permalink
    July 19, 2020 12:08 pm

    By Disney I assume she means Fantasyland.
    By Net CO2 (by whatever date) I wonder what she means. Does this mean cutting CO2 emissions from electricity generation? According to some that involves 20% of the whole, but THEORETICALLY it MIGHT be done. All that is required is trillions spent on storage. I don’t think the ordinary billpayer will be enthused by that,
    nor by batteries to the right of them,
    batteries to the left of them,
    Into the valley of financial death,
    the gallant taxpayer may not plunge.
    Was there any person dismayed?
    Of course they are.

    Then there is the transport sector. The reluctance to spend double the price for an inferior vehicle appears to rule out anything but compulsion. Esp. with the charging difficulties.
    And heavy goods aren’t going to travel by train to where they’re wanted.
    Not that the remaining industry will want much heavy goods nor many employees.

    As for the Climate Conference I would point out that countries responsible for over 66% of CO2 emissions have no intention of cutting theirs (unless paid very handsomely).

    It woud be simpler (and cheaper) to dress Baroness Worthingham up as the fairy godmother and have her drive up to the Climate Conference in a pumpkin. I am sure the BBC would send a film crew. Tentative Title “Britain leads the world” Downhill I think.

    • July 19, 2020 6:11 pm

      By Disney, I thought she meant now was the time to put our corpses in cryogenic suspension (I know, urban myth, but still).

  6. Ian Phillips permalink
    July 19, 2020 12:11 pm

    Paul comments rightly that “surely we should have learned our lesson by now”. i.e. that the rest of the world is going to carry on with fossil fuels and keep their economies flourishing regardless of our greening efforts. But the actual lesson, being drummed into us, is that keeping the economy buzzing is of secondary importance. No…..the main thing is that rebellious Brits must learn to do what they are told, by scientists and academics who know best what’s good for us. The actual economy must come lower down in the very different scale of values of the green new world “wokenomic” order. How dare anyone challenge the obvious superiority of this exciting revolutionary mindset!
    I propose scrapping “Net Zero” and adopting a “Not Zero” approach of continuing with fossil fuels way beyond 2050, while continuing, meanwhile, to develop and introduce new technologies. But the main goal must be to ensure a balanced and stable energy supply. In particular, nuclear energy needs a renaissance with the introduction of the Thorium Molten Salt reactor, currently being developed in a list of countries. No radiation leak problems with this system and hugely less toxic waste to deal with. The Thorium fuel source mineral is distributed all over the planet.
    Britain should be leading the field in this obvious long term solution. Instead, it is being effectively shunned by our current political establishment.

    • Gamecock permalink
      July 19, 2020 1:13 pm

      Cirrusly, Ian? The Thorium Molten Salt Reactor (sic) has been ‘in development’ for 60 years now. But it’ll be ready any day now . . . .

      ‘Instead, it is being effectively shunned by our current political establishment.’

      More importantly, it is shunned by nuclear physicists and engineers. It died a proper death 35 years ago. It is only popular science rags that keep the idea alive.

    • Broadlands permalink
      July 19, 2020 1:13 pm

      “I propose scrapping “Net Zero” and adopting a “Not Zero” approach of continuing with fossil fuels way beyond 2050, while continuing, meanwhile, to develop and introduce new technologies. But the main goal must be to ensure a balanced and stable energy supply.”

      A rational approach that makes good sense! The problem? Those in charge would have to give up their firm belief that climate model forecasts are correct. Give up the idea that climate science is settled science. That’s very unlikely until it becomes obvious that CO2 is still rising regardless of all their efforts, including taxes. Zero or NET zero are both impossible goals.

  7. Gamecock permalink
    July 19, 2020 1:07 pm

    A UK Carbon Tax is a GREAT idea! As well as Net Zero.

    For your assistance, I provide a link to the South Carolina Department of Commerce. They will energetically help you in relocating your businesses.

    https://www.sccommerce.com/buildings-sites

  8. ianprsy permalink
    July 19, 2020 1:19 pm

    # First, both the Government and the public are enthused by the idea of a green recovery
    # Fourth, voters accept that taxes are going to have to go up
    # They are also broadly in agreement that, if taxes have to rise, then you may as well do something positive about the environment in the process.

    Nobody asked me, or the answers would have been very different. Looks like somebody’s been doing some policy-based research, talking of which (OK, OT) a polling expert** was on the radio the other day, marveling at the public’s apparently more relaxed attitude to immigration post Brexit, as evidenced by the welcome that would be given to the possible 200000 Hong Kong Chinese. They failed to (or daren’t) ask if the positive answer had anything to do with where the immigrants would be coming from.

    Such is public policy made, and the expert** was from Youguv. What chance do we have?

    • It doesn't add up... permalink
      July 20, 2020 1:30 pm

      It might be amusing to poll the inhabitants of Leicester on their willingness to see a large number of immigrants from say Nigeria, and those of South Lobdon on a large influx from Bangladesh. .

  9. Vernon E permalink
    July 19, 2020 1:35 pm

    And she is near the heart of government? Scary.

  10. July 19, 2020 1:50 pm

    Not a lot, unfortunately our government is rather weak when it comes to anything more complex than ordering a sandwhich at Pret a Manger

  11. Broadlands permalink
    July 19, 2020 1:54 pm

    Ianprsy: What chance do we have? Very little as long as those in charge believe in climate models that predict a dire future. In 1975 when it became obvious that further global cooling was not happening the emphasis quickly shifted to the next calamity. Perhaps this might take place if the current climate keeps cooling…or at least doing very little of what has been forecasted.

  12. July 19, 2020 1:58 pm

    R4 9:30pm a repeat of Monday’s prog
    “How to think radically about the environment without being an eco-fascist”
    Lucy Proctor puts forward 2 strawmen, nastily so, cos she uses the trickery of redefining established language.

    “At its most extreme, this way of thinking leads to eco-fascism,
    the belief the harm humans do to Earth can be reduced by cutting the number of non-white people.”
    GRADE #1 TRICKERY ALERT : she’s redefining language
    “eco-fascist”, “eco-Nazi” already has a well established meaning as meaning totalitarian green activists
    it has never meant *green racists*
    https://www.bbc.co.uk/programmes/m000kw56

    My full comment over on B-BBC

  13. bobn permalink
    July 19, 2020 2:04 pm

    She is a good example of the slick propagandists that now dominate this country.
    She mentions polling – done by her – what biased questions were asked? How many replied? Basically untested, unverified, unevidenced and most likely totally manipulated and biased poll of her yoga class. But pronounced as if if proved something when its just flim-flam.
    Then she postulates about Disney being late to the streaming party. Who said it was too late? Who said they couldn’t do it? Her cat? Her dog? All the investment experts i read said it was a ‘no-brainer’ that it would work for disney given their huge library of content. Netflix are the ones who might catch a cold as they have to buy in and create content fast!
    However our propagandist just makes stuff up and then spouts lies with confidence.
    No doubt the BBC will broadcast this crap and the politicos will lick her toes.

    • July 19, 2020 9:00 pm

      Of course *slick propagandists* should read: sick propagandists.

  14. July 19, 2020 3:07 pm

    “a carbon charge requires people who produce, distribute, or use fossil fuels to pay for every tonne of carbon dioxide that enters our atmosphere.

    They all “enter our atmosphere” but the issue in AGW is whether they stay in the atmosphere and cause atmospheric CO2 to rise. No carbon taxes can be charged without the evidence that the ton of CO2 being taxed has stayed in the atmosphere.

    https://tambonthongchai.com/2020/06/10/a-monte-carlo-simulation-of-the-carbon-cycle/

    https://tambonthongchai.com/2020/06/14/responsiveness-of-atmospheric-co2-to-fossil-fuel-emissions/

  15. Gerry, England permalink
    July 19, 2020 3:30 pm

    The City of London is running a poll on its climate strategy. Please feel free to complete it and yes, you can say that no climate action is necessary and you can even skip lots of the questions if you don’t like the answers. Feel free to make up something about your relationship with the City since the climate emergency is make believe.

    • It doesn't add up... permalink
      July 20, 2020 2:42 pm

      I noted that 40% of respondents are from the Corporation of London. Kind of biases the answers.. I have no idea why they think that collecting data on religion and ethnicity is essential.

      It is of course a voodoo poll,with a largely self selecting set of responders.

  16. cajwbroomhill permalink
    July 19, 2020 3:59 pm

    Since we in UK emit negligible greenhouse gases as a pr0portion of total world output, all Green spends must end completely, which they would have already were it not for ignorance, mendacity, gullibility and corruption.

  17. markl permalink
    July 19, 2020 4:19 pm

    That worked out well in France and the USA. Everyone agrees that it’s a good idea to save the world but no one wants to pay for it. Europe doesn’t seem as bothered by taxes as people in the US though.

    • cajwbroomhill permalink
      July 19, 2020 4:49 pm

      Cutting carbon may .well ruin us in the West, but could not possibly save the world.

      • Harry Passfield permalink
        July 19, 2020 6:49 pm

        I think I shall encourage my 5-year-old grandson to learn Mandarin. He might need it when he comes of age.

  18. Robin Guenier permalink
    July 19, 2020 5:54 pm

    There are various problems with this plan. Here are just two:

    1. The Public First polling on which it bases its assertion that ‘the public are enthused by the idea of a green recovery’ are seriously inadequate – focusing only on the one issue (green recovery) and not allowing the respondent to consider that in the light of other issues they might find more important. In other words, a ‘have you stopped beating your wife yet?’ survey.

    Details here: https://static1.squarespace.com/static/5e1ee218fbeca217fe06a421/t/5ef8f961fe8b687d4e7e0330/1593375077484/Public+insights+briefing+-+The+Zero+Carbon+campaign.pdf

    2. When the ‘Interim Report’ gets down to detail it gets muddled and unclear. For example, re gas it proposes a new charge for households it notes how this could damage ‘the poorest’ and suggests very complex methods of overcoming this which, as it says, is ‘important morally’. And re agriculture it proposes ‘a single, simple charge’ on all emissions but only when a ‘Border Carbon Adjustment or equivalent mechanism is in place’. This turns out to be hugely complex and uncertain. As the Report says ‘We recognise that this is ambitious’. There are many other examples – none of which are echoed in the polling.

    Details here: https://static1.squarespace.com/static/5e1ee218fbeca217fe06a421/t/5f02dc01e84f7d7af2265b9d/1594022940917/Interim+Report+-+The+Zero+Carbon+Commission+on+UK+Carbon+Pricing+-+June+2020.pdf

    • Phoenix44 permalink
      July 20, 2020 1:21 pm

      Which is why its not a “carbon tax”. A proper carbon tax leaves nobody worse off because other taxes are lowered to offset the carbon tax. As importantly it doesn’t give government additional revenue to spend being Green. But as ever, these Gren loons want it every way.

      • July 20, 2020 1:49 pm

        There is only reason why they want to bring in a carbon tax- to make renewable energy/low carbon alternatives competitive. When that happens, we are stuck with expensive renewable energy, and there is no carbon tax revenue to redistribute

  19. ThinkingScientist permalink
    July 19, 2020 6:41 pm

    “without kneecapping the economy,”

    Presumably because that’s already been done with the Covid-19 over-reaction?

    • It doesn't add up... permalink
      July 20, 2020 1:34 pm

      What’s a kneecapping when you have already amputated the economy at the hips?

  20. Harry Passfield permalink
    July 19, 2020 7:01 pm

    “The Prime Minister wants to be able to go to the summit and point to a substantive policy intervention that he can call his own.”

    Wouldn’t it be great if we had a leader who could go to the COP26 and tell ’em that this was his substantive policy:

    “My policy is to get fracking, be self-sufficient in energy and keep industry running on cheap fuel. Then and only then, we’ll see about how we can work with Chinese batteries. In the meantime, wind and solar farms will have to support themselves and the back-up required to sustain them. They shall also pay for their grid connections. In the meantime, the climate will take care of itself”

    Exploding green heads everywhere. Such joy. Then I woke up.

    • Gerry, England permalink
      July 19, 2020 7:50 pm

      Unfortunately we have been lumbered with an idiot as Prime Minister described as a ‘pathetically insecure narcissist’ and ‘an abject, hectoring, incompetent show-off’ as well as being a proven liar. It’s a toss up between him being deposed by his party or deciding that this Prime Ministering thing isn’t as much fun as he thought it would be and sauntering off amid the debris of the economy.

  21. Mad Mike permalink
    July 19, 2020 8:41 pm

    Since polls seem so important to these guys I suggest Paul runs his own poll and sends it to the Prime Minister. Now let me guess what the poll would indicate.

  22. Angusmac permalink
    July 20, 2020 9:37 am

    Carbon Tax?It could be a carbon rebate because Dayaratna, McKitrick and Michaels state that the lower bound of the social cost of carbon is likely negative, i.e., it is net benefit to the planet. See link here:https://link.springer.com/article/10.1007/s10018-020-00263-wTherefore, should we be getting cash back every time we fill our car?

    • Phoenix44 permalink
      July 20, 2020 1:16 pm

      No, since we all gain so there’s no need for a rebate.

  23. Phoenix44 permalink
    July 20, 2020 1:15 pm

    The article is completely confused. How would paying for Green projects pay down debt? Who exactly chose to be unemployed for longer to have a Green recovery?

    If we have to do something about Climate Change, a proper carbon tax is the best solution. But this isn’t a proper carbon tax. Its increased tax, Green spending and government intervention.

  24. Gamecock permalink
    July 20, 2020 2:21 pm

    Governments justly tax their populations to pay for government functions.

    Taxing to effect behavior is corruption of the government’s writ. A “proper carbon tax” is preposterous. Indeed, a calculation to get you to accept the unacceptable.

    • Up2snuff permalink
      July 20, 2020 8:05 pm

      Gamecock, all taxes change behaviour to an extent. Just look at the history of UK taxation.

      • Gamecock permalink
        July 21, 2020 10:57 am

        Yes, but is their objective to raise revenue or to change behavior?

    • Up2snuff permalink
      July 21, 2020 9:02 pm

      Gamecock, like brianrlcatt below, I think it is a scam. It was revenue raising but under the guise of producing a benefit for the environment. You see that from how it was introduced.

      Tax income and unless you make the rules watertight, the wealthy will find a way around them. It is far easier to catch motorists at the petrol pump and doesn’t require substantial changes to the tax code or Civil Service compliance.

      Treasury is bust after Black Wednesday; therefore create the Fuel Duty Escalator and bingo! The Treasury gets filled up again. And John Major, Norman Lamont and Ken Clarke can pat themselves on the back ‘We haven’t broken our manifesto pledge to increase Income Tax, we are just showing that Conservatives care about Green issues, too.’.

      Critics then point out the flaws, not least that other fuel uses do not suffer tax. So then along comes APD. Critics point out the flaws in the thinking. Bingo again! Along comes VAT on energy, esp. with the EU’s help who quickly join in the game. Critics point out the flaws yet again and whay hey, now we have extra tariffs on gas and electricity bills to fund wonderful windmills and profligate panels while the environment goes hang, ruined by all these man-made structures.

  25. Coeur de Lion permalink
    July 20, 2020 7:02 pm

    There’s a little ‘hard pressed’ family up the road from us who do their various businesses by means of four small saloon cars and a camper van. To go electric will cost about £160,000 and then to rewire their home for charging points. It will never happen.

  26. Up2snuff permalink
    July 20, 2020 8:02 pm

    If the Covid-19 Pandemic has shown Governments national (around the world) and local (in the UK) anything, then it is that in a Pandemic, with a Lockdown in force, indirect/stealth/hidden taxes just do not work. Their effectiveness – at changing behaviour – is completely nullified.

    As this is likely to be the ‘new normal’, then wise Chancellors of the Exchequer or Treasury Secretaries will junk indirect, stealth and hidden taxes in their economies and restrict their revenue raising to corporate and personal income, capital gains, sales and in the case of individuals – death.

  27. July 20, 2020 9:05 pm

    I believe you will find vehicle tax in the UK is on harmless CO2 emssions, not the polluting gasses now. So we are taxed on emitting a harmless natural gas, not on the harmfull pollutants originally used to justify this tax, now minimised by regulation. This was never about pollution or the climate. CEng, CPhys.

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