WIREDGOV

A tax on the emissions of power companies will do nothing to reduce carbon and threatens to sully the reputation of policies aimed at tackling climate change, according to a new report published last week by IPPR.

The thinktank report - Hot Air: The carbon price floor in the UK - analyses the Carbon Price Support scheme, which is due to begin in 2013. It concludes that the design means that although emitting carbon in the UK will be more expensive, because the market is Europe-wide, a higher price in the UK will lead to a lower price elsewhere and to the same amount of carbon being emitted.

The Government’s own data shows that the scheme will force up to 60,000 more UK households into fuel poverty as energy companies pass on the additional costs of paying the tax to consumers. The report says there are better ways to raise revenue for fiscal consolidation. 

The report argues that because the scheme was introduced in the Budget, it will be open to annual scrutiny and potential change, in the same way as fuel duty. The report says that this means the Government’s claim that the scheme will help provide certainty for investors who want to build nuclear power stations or install renewable energy technology is undermined.

New modelling by IPPR in the report suggests that introducing a floor price for carbon in only one of the ETS’s participating countries will undermine the economic efficiency of the scheme and could waste up to £1 billion.

Andrew Pendleton, IPPR Associate Director, said:

'The Carbon Price Support scheme risks giving energy and climate change policy a bad name because it will do nothing to reduce carbon emissions while piling more cost on to the shoulders of already hard-pressed consumers in the UK.

'Because a floor price for carbon in the UK will depress the carbon price elsewhere in Europe, the UK will effectively hand over billions to European polluters. At a time of austerity and efficiency, wasting £1 billion is inexcusable; it’s enough to finance a second carbon capture and storage plant.'

The report argues for a different approach to introducing a floor price for carbon that would see the number of permissible emissions in the UK being reduced. However, because the Government has already introduced the measure, the report recommends setting the level of the tax low to minimise the economic waste and impact on other European countries and also urges ministers to press for other European countries to introduce similar measures.

Notes to editors

The Carbon Price Support scheme was promised in the Conservative Party manifesto and is intended to prop up the price of carbon in the European Emissions Trading Scheme (ETS), which has often been too low to trigger any major changes in energy investments.

Contact

Tim Finch, 07595 920 899, t.finch@ippr.org