A report published today is highly critical of the Government’s carbon floor price policy, saying it could add £1 billion to energy bills, will have no effect on reducing emissions and risks bringing into disrepute policies aimed at tacking climate change.
Hot Air, a report by the
Institute of Public Policy Research (IPPR), concludes that the
Carbon Price Support Scheme, a UK Government
policy set to come into force in 2013 to guarantee a minimum price for carbon, is doomed to failure as a green policy. Instead of reducing carbon emissions, it will simply push the problem elsewhere, while making carbon more expensive for companies in the UK. Meanwhile, it will drive more UK households into fuel poverty as energy companies pass on the cost of the tax to their customers, and could even fail to attract the
investment in low carbon energy technologies the policy intends to kick-start, the report argues.
"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," said Andrew Pendleton, IPPR associate director. "It’s been very poorly designed and is not principally about climate change. If you look at it in detail, it’s a revenue raiser."
No effect on carbon emissions
Intended to prop up the price of carbon in the European Emissions Trading System (ETS), which has often been too low to trigger any major changes in energy investments, the IPPR report says that under its current guise the Carbon Price Support scheme will make carbon in the UK more expensive but will lead to a lower price elsewhere and to the same amount of carbon being emitted.
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.
Green investment
Moreover, the scheme may not even have the desired effect of encouraging private investment in cleantech, because it was introduced in the Budget and could be open to change, said Pendleton.
"We are sceptical on that point because it has been put through the Finance Bill and will be open to annual scrutiny, and as we know from the review of the Feed-in Tariff, it doesn’t take a lot to give investors cold feet," he said.
Recommendations
Pendleton said the IPPR wasn’t against the idea of a floor price for carbon, but said it needed to be introduced in conjunction with other European countries for it to work.
Instead, he said the IPPR favoured a policy that would reduce the number of permissible emissions in the UK. However, in the event of the Government sticking by the policy, he said the report recommended setting the level of the tax low to minimise the economic waste and impact on other European countries.
"At a time of austerity and efficiency, wasting £1 billion is inexcusable; it’s enough to finance a second carbon capture and storage plant," he said.
Earlier this month, the
CBI called for energy intensive businesses to be exempt from the carbon floor price, saying it risked tipping them "over the edge" and making the UK’s manufacturing sector uncompetitive.
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