‘No party fulfilling voter desire for green champion’

THE GLOBE AND MAIL – 27/04/09

This article highlights the unexpected level of voter interest in the environment in British Columbia’s election at a time when Canada is otherwise ‘gripped with concerns about the state of the economy’. More unexpected still is the Green Party’s focus, not on the environment, but on the economy. British Columbians do not want to see Liberal leader, Carole James, ‘axe’ the carbon tax (whether it is likely to have any measurable impact on global warming or not) and there appears to be a general feeling amongst voters that none of the parties have a coherent environmental policy. Read the article…

‘Carbon trading won’t stop climate change’

In this article, Andrew Simms highlights why the EU ETS is not working and what needs to be done to set a meaningful price for carbon. The article explores alternative pricing options, including calculating the marginal abatement cost, the social cost of carbon, and the shadow cost of carbon but illustrates that none of these address the paradox of environmental economics; ‘all these methods of pricing carbon permit the creation of a carbon market that will allow us to pollute beyond a catastrophic tipping point. In other words, they require us to put a price on the final ‘killing’ tonne of carbon dioxide which, once emitted, tips the balance and triggers runaway global warming. How can we set such a price? It’s like saying, how much is civilisation worth? Or, if you needed a camel to cross a desert alive, what is a fair value for the straw that breaks its back?’ Simms shows that this paradox reveals the shortcoming of market solutions to environmental problems; carbon markets will not work unless they operate within a global carbon cap sufficient to prevent a rise of more than 2˚C above pre-industrial temperatures. He argues that, whilst the role of governments is to compensate for market failure, they seem to have a ‘blind spot’ about carbon markets, and concludes that price mechanisms are ‘too vague, imperfect and frequently socially unjust’ and therefore unable to sufficiently reduce carbon emissions. Read the article…

Achieving 2050: A Carbon Pricing Policy for Canada

The National Round Table on the Environment and the Economy has recently released a new report entitled Achieving 2050: A Carbon Pricing Policy for Canada. This report shows how Canada can achieve its environmental targets for GHG emission reductions at the least economic cost through a comprehensive cap-and-trade system and other policies that unify carbon prices and approaches across Canada. The carbon pricing policy proposed in Achieving 2050 aims to be responsible, reasonable, and realistic. It is responsible by integrating economic concerns with reaching our environmental goals throughout the design and implementation of the policy. It is reasonable by providing a suitable transition period to get the proposed new cap-and-trade system up and running across the country and enabling businesses and consumers to adjust. Finally, it is realistic by building on existing climate policy approaches – federally, provincially, and internationally – so we can make faster progress in reaching our goals.

The report is the product of over a year of intensive research and consultation by the NRTEE with leading national and international experts, environmental organizations, and industry associations. It argues that carbon pricing is a policy whose time has come; that now is the time to lay the groundwork for a truly effective long-term climate policy framework based on a unified carbon pricing policy at home, and internationally harmonized approaches abroad.

‘European parliament to pass bill to cut bills’

THE GUARDIAN – 22/04/09

The European Parliament has approved legislation that will give greater protection to EU households suffering from soaring gas and electricity bills. The new law stipulates that governments will draw up national energy action plans to eradicate fuel poverty or, at least, offer greater protection to the most vulnerable energy consumers. A new pan-European consumer charter will enable customers to switch suppliers within a maximum three weeks, and will force the industry to put smart meters into 80% of homes by 2020 and all homes by 2022. Read the article…

Responses to the budget in the press

Consumer Focus has ‘slammed’ the budget, arguing that it fails to effectively tackle fuel poverty, to create green jobs and is likely to push more people into fuel poverty. Ed Mayo, Chief Executive of Consumer Focus, stated ‘of course there are spending pressures and limits, but it is a nonsense to neglect energy efficiency and fuel poverty in a Budget so focussed on climate change’.

The Times is sceptical of the budget’s green credentials, stating ‘if this a green Budget, it was one tinged heavily with sticky, black, crude oil,’ arguing that the tax concessions granted for the North Sea oil and gas industry would likely ‘dwarf’ any of the green incentives. The article criticises the car scrappage scheme, highlighting that it is not accompanied by any stipulation to buy more fuel-efficient vehicles. It also questions why so few of the green initiatives will be paid for by the British Government e.g. the £4.5 billion funding from the European Investment Bank for offshore wind farms, and the £525 million from consumers in the form of higher payments under a renewable obligation certificate subsidy scheme. It quotes Andy Atkins, Friends of the Earth; ‘the Government has merely applied a sticking plaster to a low-carbon industry on life support’. A later article also criticises the budget for likely increasing the numbers in fuel poverty.

The Telegraph is equally sceptical, stating ‘the realisation that any hope of salvation now seems to be pinned on greening the economy (and taxing the rich) left me quaking in my boots’. This article also criticises the car scrappage scheme, asking why the car industry is being subsidised at all, and questions the degree to which offshore wind farms can generate the necessary levels of employment. It does, however, commends the government for setting up the Office of Nuclear Development. 

The BBC highlights the ‘novelty of a carbon target’ in the budget, but explores the associated caveats, including: the target may not be met, no-one knows what a ‘legally-binding’ target actually means in practice, and for campaigners the target is not drastic enough. Despite these caveats, it is suggested that the target may help to guarantee a stable policy and economic environment in which firms can invest safely. The article highlights commitments made to renewable energy, energy efficiency and CCS demonstration projects, but echoes accusations that these measures represent ‘green plasters’ and quotes Andrew Simms that the budget ‘turns out to be more beige than green’. 

The Guardian examines the green measures announced in the budget, including support for wind power, the carbon balance, energy efficiency measures and coal burning. Highlighted are criticisms of the support given to the car and oil industries, the limited investment in energy efficiency measures, and the building of new coal plants without CCS technology. A later article, written by Sir Nicholas Stern, suggests the budget is making ‘tiny steps in a marathon’, commending progress but emphasising that ‘many more bold steps towards a low-carbon economy need to be taken over the next few years, as part of a coherent, consistent and credible strategy to tackle climate change’. The article calls for a strong carbon price to reflect the true costs of emitting greenhouse gases, and suggests that the increase in fuel duty above inflation from September aims to drive consumers to engage in the transition to a low-carbon economy.

A subsequent article in the Guardian also highlights criticisms from Age Concern and Help the Aged that the budget will result in millions more pensioners sliding into fuel poverty, suggesting that the announced measures would do little to help people on the lowest incomes, especially those who missed out on means-tested benefits.

Response to Budget 2009

There is much to welcome in this Budget from a green and low-carbon point of view, while recognising that to meet its ambitious stated objective of making the UK a leader in green manufacturing and low-carbon technologies, the Government will have to do much more, and go much further, in PBR 2009 and Budget 2010. Not surprisingly, the Government has accepted the recommendation of the Committee on Climate Change to commit to a 34% reduction in greenhouse emissions, from the UK economy rather than through foreign credits, by 2020. Independent projections and forecasts confirm that the Government will need to implement far more stringent policies to meet this target than are in this Budget – but the Budget can be seen as a start in the right direction.

Most positively this Budget contains a limited environmental tax reform (shift of tax from goods to bads), with the fuel duty increase being the single most important addition to revenues in 2009-10 and 2010-11. This and other environmental taxes will increase the proportion of tax revenues from environmental taxes for the first time since 1999. Much research has shown that a tax shift of this kind is one of the most effective ways of improving the environment, while simultaneously supporting employment. The tax shift does not go far enough, and certainly does not establish a robust price of carbon across the economy, as is required if the UK is to meet its carbon targets. But it is a welcome start, and not an expected one, that can be built on in future years.

The other single most important recognition in the Budget is that without further support offshore wind power will not be installed in anything like enough quantity to enable the UK to meet its renewable energy targets for 2020. It remains to be seen whether the support announced has the desired effect – the UK has not been good at stimulating private investment in renewables to date, lagging far behind other European countries. The effect of this support must be monitored carefully to see that it really does stimulate the step change in deployment that is required.

Similarly, the Strategic Investment Fund for low-carbon technologies, and the extra commitments in relation to CCS, are most welcome, but not enough details are given to permit a judgement as whether they will actually work to get the investments on the ground.

The further expenditure on resource and energy efficiency in buildings is likewise a step in the right direction, but it still barely scratches the surface of the problem, which will need a comprehensive and much more ambitious approach if carbon savings from buildings are to make the contribution to meeting the carbon targets in 2020, without which the carbon targets will be missed.

In summary, in the past this Government has been very long on rhetoric about the need to reduce carbon emissions and deploy renewable, but very short on delivery. This Budget is similarly long on rhetoric – this time the delivery must match it by following through on the welcome starter measures and initiatives that have been announced.

‘IPPR urges a greener and fairer budget’

IPPR – 22/04/09

Ahead of tomorrow’s pre-budget report, IPPR has suggested a package of measures, including a carbon tax, which would benefit all but the wealthiest of individuals and families, and would enable the government to meet its commitment to halve child poverty by 2010. Whilst IPPR recognises that a carbon tax in isolation would be regressive, they have used a new model – which calculates the effects of changes within the UK tax and benefits system – to devise a package that would compensate low-income households. Key elements of the package include: a new carbon tax on domestic fuels and electricity, levied at £25 per tonne of carbon dioxide; an increase of £1000 in the personal allowance; increases to Jobseekers Allowance, Child Benefit and Child Tax Credits; a new 50% income tax rate for those earning more than £250 000 a year; and removing the ceiling on National Insurance contributions for high earners. IPPR has calculated that their proposal will raise £1.2 billion in additional revenue and start to switch the tax burden from income to carbon (i.e. from ‘goods’ to ‘bads’). The extra money could then be spent on an expanded energy efficiency programme targeted at low income households, including the expansion of fuel poverty programmes and more effective regulation to require private landlords to improve energy efficiency in their properties. More…

Re: Mixed reviews for Danish green tax reforms

Once again Denmark appears to have responded intelligently to the collapse in global oil prices, and reductions in gas prices. As in the 1990s, its government has seized this opportunity to introduce a green fiscal reform, raising taxes on carbon-based energy while cutting other taxes, in this case income taxes. The benefits of this policy will be several. Most importantly, it represents probably the cheapest way of reducing carbon emissions, helping Denmark to reach its carbon reduction targets at a lower cost than would otherwise be incurred. But its economic implications are hardly less positive. The overall effect on the macro-economy will be small, though some models suggest that it is likely to be marginally positive because of the extra employment that is likely to be generated (when income taxes fall at a time of high unemployment, workers may be prepared to reduce their wage, to leave their take-home pay unchanged, and this can stimulate labour demand). But the main economic effect will be to stimulate the development of low-carbon technologies, both in energy supply and energy demand. To the extent that such technologies become attractive globally, this will enable Denmark to develop new competitive industries, as it has done already with wind (partly on the back of the previous green fiscal reform). Denmark has shown again that it can respond to the opportunities, as well as the challenges, of climate change. When will the UK show the same?

Re: Quarter of UK homes to be offered a green makeover

At last, in its Heat and Energy Saving consultation, the Government has recognised the scale of the challenge in retrofitting existing UK homes to help meet its challenging CO2 targets and make the UK housing stock part of a low-carbon economy instead of a fuel-consuming, carbon-emitting liability. The problem is that at this stage it says that it will only ‘make available’ to 7 million homes by 2020 the necessary financial package to address the challenge. On past experience, only a very small proportion of households will take up this offer, so that progress on improving home energy efficiency will remain far slower than the carbon-reduction targets demand. This is one of the most difficult areas in which to achieve carbon reduction (as well, paradoxically, as being one of the cheapest when the energy efficiency measures are actually installed). It will require a sophisticated package of measures involving contractor-training, builder and householder obligations, and the promise of high and rising prices of carbon-based energy, through a revenue-neutral carbon tax, as well as a sizeable subsidised loan, for the necessary carbon reductions to be achieved. The consultation raises most of the relevant issues, except the necessary rise in carbon/energy prices, but completely fails to make proposals that will address the problem. As a result, unless the strategy to emerge from this consultation is very considerably strengthened, we can be sure that only few of the 7 million homes will have received the envisaged level of energy efficiency improvement by 2020, and more rhetoric about the necessity of reducing carbon emissions will have failed to generate appropriate government action to meet its stated objectives.

Re: Sweden announces CO2 tax hike as it goes nuclear

Sweden’s energy policy objectives (ecological sustainability, competitiveness, energy security) are not dissimilar from those of the UK. Its approach to achieving them is, however, rather more realistic. Its recent policy statement states unequivocally: “General economic policy instruments are fundamental for long-term energy policy; these include carbon dioxide tax, international emissions trading and certificates for renewable electricity.”, and the policy instruments to go with it include a significant increase in the already substantial Swedish carbon tax. Fuel taxes and other energy taxes will also be increased, in order to contribute to its 40% emission reduction target (from 1990’S level) by 2020. This is not only a higher emission target than the Climate Change Committee has proposed for the UK, but the willingness to use taxation to drive up the price of carbon means that Sweden has a much higher chance of achieving it.