A Guardian reporton the 5th October examines the predictions of a chapter in the current IMF half yearly World Economic Outlook report. It has a chapter titled Near-Term Macroeconomic Impact of Decarbonization Policies. The chapter models the cost of delaying the tackling of climate change until ‘conditions are right’ and current global inflation has lowered; an IMF blog about it is titled.. ‘Further Delaying Climate Policies Will Hurt Economic Growth…The transition to a greener future has a price—but the longer countries wait to make the shift, the larger the costs’.
The blog argues that concerns about current cost have been perceived to be more real than the nebulous future threat of climate change, causing decades long procrastination …’despite overwhelming evidence that any short-term costs will be dwarfed by the long-term benefits (with respect to output, financial stability, health) of arresting climate change (October 2020 World Economic Outlook; IPCC 2022).
The current crisis has heightened the fear that climate mitigation would just raise inflation further and led to the claim that we need to double down on fossil fuels for energy security (as in the UK). Concurrently a Global Energy Monitor report states that…
New oil and gas development in the North Sea could produce up to 984 megatonnes of CO2 equivalent and contribute to the United Kingdom exceeding its carbon budget for 2023-2037 by a factor of two.
The IMF’s modelling uses the revenue from gradually rising greenhouse gas taxes returned in part to households to drive the transition….
To assess the short-term impact of transitioning to renewables, we developed a model that splits countries into four regions—China, the euro area, the United States, and a block representing the rest of the world. We assume that each region introduces budget-neutral policies that include greenhouse gas taxes, which are increased gradually to achieve a 25 percent reduction in emissions by 2030, combined with transfers to households, subsidies to low-emitting technologies, and labor tax cuts.
It argues that the policy, if started now would have a modest decline in GDP and rise in inflation, slowing global economic growth by 0.15 to 0.25% and rising inflation by 0.1 to 0.45; but if delayed until 2027 with the rationale of waiting until inflation is down the effect on the global economy would be worse….
Is it reasonable to wait—as some have proposed—until inflation is down before implementing climate mitigation policies? We ran a scenario delaying implementation until 2027 that still achieves the same reduction in cumulative emissions in the long term. The delayed package is phased in more rapidly and requires a higher greenhouse gas tax, since a steeper decline in emissions is necessary to offset the accumulation of emissions from 2023 to 2026.
The results are striking. Even in the most favorable circumstances when monetary policy is credible and the transition to decarbonized electricity is rapid, the output-inflation trade-off would rise significantly; GDP would have to drop by 1.5 percent below baseline over four years to drive inflation back to target. Delay beyond 2027 would require an even more rushed transition in which inflation can becontained only at significant cost to real GDP. The longer we wait, the worse the trade-off.
The take home message? ….if the right measures are implemented immediately and phased in gradually over the next eight years, the costs will remain manageable and are dwarfed by the innumerable long-term costs of inaction.
The report titled Empirically grounded technology forecasts and the energy transition derives from a collaboration between the Institute for New Economic Thinking at the Oxford Martin School, the Oxford Martin Programme on the Post-Carbon Transition, the Smith School of Enterprise & Environment at the University of Oxford, and SoDa Labs at Monash University.
Professor Doyne Farmer told BBC News that.. “Even if you’re a climate denier, you should be on board with what we’re advocating…..Our central conclusion is that we should go full speed ahead with the green energy transition because it’s going to save us money,” ($12tn by 2050!). The report cites examples of cost predictions made by the IPPC and in the UK by Philip Hammond which it claims are erroneous and have been a deterrent to investment.
The report states that scaling up green technologies (solar and wind) will continue to drive down their costs. Why not also encourage the investment needed by putting a steadily rising price on the carbon content of fossil fuels to reflect their true cost to society and further encourage the uptake of renewables, returning the revenue to the populace to compensate for the rising prices of said fossil fuels during the transition period, aka Climate Income?
On the 1st June three former UN climate chiefs, Christian Figueres (2010-16), Yvo de Beor (2006-10) and Michael Zammit Cutajar (1991-2002) wrote a joint article in the Guardian. They state that in February the world’s governments endorsed the IPPC report on Impacts, Adaptation and Vulnerability and thus the statement that…
“The cumulative scientific evidence is unequivocal: Climate change is a threat to human wellbeing and planetary health…. Any further delay in concerted anticipatory global action on adaptation and mitigation will miss a brief and rapidly closing window of opportunity to secure a liveable and sustainable future for all.”
Despite thisthe trajectory of current worldwide climate policies would lead to a temperature rise of between 2.7C and a catastrophic 3.6C above pre-industrial levels. Governments can’t act as if other crises such as health, poverty and security can be tackled whilst ignoring the climate crisis, they are interlinked. Perhaps, they argue…
If science has not persuaded most governments to act, perhaps economics will. The IPCC provides clear evidence that societies will be more prosperous in a world where climate change is constrained, than in one left to burn. In the energy sector, evidence of the zero-carbon transition is all around us. Wind and solar generation shows compound growth of about 20% a year and is cheaper almost everywhere than the alternatives. Electric car sales doubled between 2020 and 2021.
Unless one is invested in fossil fuels, there is now no reason not to take the clean energy path. Many corporate actors understand the need for early action on this front. But governments still need to incentivise the transition. The evolving Just Energy Transition packages may yet offer an investment pathway that can accelerate deployment in emerging and developing countries. Corporate action towards other targets such as reduction of methane emissions, also needs to be encouraged.
Carbon pricing, we might add, would reinforce the argument for decarbonisation if it applied in a way that enables forward planning and enhances the economic well being of the majority of people, as with Climate Income.
It seems appropriate to be writing about a blog by an Oxfam researcher on this Jubilee weekend as the biblical purpose of Jubilee years was to release the indebted and restore their land to them. Climate change is a symptom of global economic and social injustice. In the debate about solutions carbon pricing is often criticised as a regressive and ineffectual policy favoured by those who want to keep the economic status quo – of course supporters of Climate Income know better!
Before we get to the arguments about whether carbon pricing can work, it’s essential to point out that carbon prices are currently inadequate to address climate change. In the vast majority of cases, prices are too low, and not applied to enough of the economy to drive decarbonisation at the rate necessary. The graph below shows how prices are generally below $50 per tonne of CO2 (they need to be closer to $100/tCO2) and only cover 15% of the global economy (they need to be at 100%). Despite these problems, it’s notable that carbon pricing is seeing increasing uptake over time – with more and more countries adopting prices and more of the global economy under a price.
CARBON PRICING DOES NOT AFFECT EMISSIONS
First is the argument that placing a price on carbon does not affect emissions. The empirical literature doesn’t support this claim. Numerous empirical studies of carbon pricing, using a variety of methods, demonstrate that carbon pricing has reduced emissions. There is some question over whether the emissions reductions have been large enough, but this really comes down to what you consider “large” and what sort of reductions might be expected at what prices. In general reductions in emissions have been small, but significant, especially considering the low prices in place.
IT WON’T BE ENOUGH BY ITSELF TO TACKLE CLIMATE CHANGE
The second argument against carbon pricing’s effectiveness is that alone, it is inadequate to tackle climate change, because consumers don’t behave like economists assume: as rational cost minimisers. For example, people don’t just buy the cheapest car for their needs; they buy cars based on ideas of status and brand loyalty, among others. This is true and uncontroversial, we need more than price signals to move consumers. However, this argument is also something of a straw doll: most of the literature on carbon pricing acknowledges that carbon pricing will need to be complemented with other policies if it is to be effective in averting climate catastrophe. To this end, advocates of a carbon price who suggest it’s the only policy we need should be viewed with scepticism.
Note that CCI doesn’t call for Climate Income to be a stand alone policy and it has not been implemented as such in the countries like Canada which have adopted it thus far.
IT WILL HURT THE POOREST PEOPLE WHEREVER IT’S IMPLEMENTED
A big concern around carbon pricing is that increasing the cost of energy derived from fossil fuels will drive regressive impacts.
Since energy is central to the functioning of the global economy, and we currently generate around 83% of primary energy from fossil fuels, a carbon price will make almost all goods in the economy more expensive. Because low-income groups tend to spend a greater portion of their income on energy-intensive goods, a carbon price will have a disproportionately large negative impact on their well-being compared to wealthy households – making the policy notably regressive.
However, a huge advantage of carbon pricing is that the price also generates revenues. Importantly, wealthy groups tend to consume more energy-intensive goods than low-income groups (even though they spend a smaller proportion of their income on these goods). What this means is that, despite regressive cost-side impacts, you can use the revenues to make carbon pricing substantially progressive. There are a number of ways to do this, but the simplest is to just return all the revenues to everyone, equally (ie on a per capita basis). Doing so would result in low-income populations receiving more than they pay in increased prices, while the opposite would be true for wealthy populations. (My emphasis).
Morrisey does point out that the policy has to overcome public antipathy to the concept of increasing taxation, which also makes the policy easier for opponents to criticise than less visible regulations and subsidies. He argues, however, that these alternative policies also encounter opposition and are no more capable of solving the problem of climate change on their own than is carbon pricing. He concludes that if there is some momentum for carbon pricing NGOs should support it with the caveats that ….
The revenues produced by carbon pricing must be used to effectively address all regressive impacts created by the price. Prices must either be set high enough to drive ambitious emissions reductions or, if prices are to start low and increase over time to overcome political opposition, the process for increasing prices needs to be automatic and insulated from political push-back. (My emphasis).
Carbon pricing can be effective but, by itself, it will not be enough to address climate change. Any carbon price will require complementary policies. The most important will relate to addressing other market failures (such as the need for public investment in research and development) and addressing networkproblems (such as supporting electric vehicle charging infrastructure), but will also include policies for numerous markets where price signals are insufficient to shift behaviour.
Along with the recent reports in Nature and by the Autonomy think tank, this blog and the related Oxfam primer on carbon pricing show growing support for the concept that a Climate Income policy will not only alleviate climate change but also the gross inequalities impeding sustainable development in the Global South.
Finally I must mention a very apposite blog by fellow Citizens’ Climate Europe member Brigitte Vangerven about the idea that protecting the climate requires sacrifice. …
Pricing pollution will make polluting products more expensive than clean products. The price difference will make people and companies choose the clean alternatives. It will greatly accelerate decarbonisation and the widespread deployment of clean alternatives. The proceeds are used to support the people in the energy transition.
Everybody receives a Climate Income. Most households, especially low and mid incomes are better off or break even through this policy.
It is simple, transparent, just and effective, and I hope that for many people it will dispel their reservations.
This makes it possible to implement an ambitious climate policy, that will receive broad support from the people. There is no longer a conflict.
Last year the IMF called for a globally applied carbon price floor corresponding to a country’s wealth, with a suggested tariff in 2021 of $75 for the wealthiest countries and $25 for less developed countries. Today in the Times (paywall) Mehreen Khan, the economics editor, makes the case for an effective international carbon pricing system rather than occasional windfall taxes….
“One levy notably absent from the present debate is a global carbon tax to provide an incentive for the huge shifts required to hit the global net-zero target. Even in relatively benign times, politicians have taken fright at the idea of taxing carbon use, thinking that it will disadvantage their industry at the expense of foreign rivals…
Arguments against national carbon taxes wither away if all countries agree to impose a price. The International Monetary Fund has devised an international carbon floor where the price paid corresponds to a country’s wealth. It would mean America, Britain and Europe would use a minimum floor of $75 a tonne, falling to $25 for the poorest. This collective jump into carbon taxation would not disadvantage industries in richer countries, the fund says, and would dramatically reduce emissions.”
We support establishment of a global “price floor”, supported by national policies to impose a steadily intensifying price signal disfavoring climate pollution. As the IEA has reported, “There is no need for investment in new fossil fuel supply…” Pricing systems should effectively and efficiently eliminate climate pollution while building incomes for people and enhancing international cooperation for a zero-emissions future.
Recent studies such as the report in Nature and the Autonomy report have also suggested how Climate Income could be a game changer for the Global South….
While countries in South America, Sub-Saharan Africa, South-Asia and many other parts of the Global South would profit immensely, most developed economies would only see proportionally relatively small losses.
…..As a global policy, it could wipe out extreme poverty and easily dwarf the scope of any existing development aid and debt relief schemes, illustrating that, in this sense, it is the Global North that owes an immense debt to the populations in the Global South, not the other way round. It would also go a long way to alleviate the disastrous impacts the Covid pandemic has had on the world’s poorest and most vulnerable, with for instance an additional 100m children falling into poverty, and prevent global disparities from deepening as richer countries recover while poorer countries fall even further behind (UNICEF 2021b). Such a global carbon dividend scheme could end the bitter reality of mass hunger and destitution and be a key building stone of a fairer, more sustainable and more inclusive post-pandemic economy. (Toll gates and money pumps, Autonomy, p.51)
It is good to see growing support for a carbon pricing system which would remove the uncertainty and short termism thwarting the rapid decarbonisation which the world needs!
Rob Paton updates us on the fantastic progress made by Citizens:mk and its future ambitions to go global, or at least England and Wales!
Last September at the Citizens:mk climate assembly, the Bishop of Oxford agreed to a request for a meeting to discuss Climate Income, and whether he might use his position on the House of Lords Climate & Environment Committee to promote the idea. He has a very full schedule, so December was the first available date… and then just beforehand, he suffered a nasty bout of Covid!. Finally, in late April, the meeting took place.
So what happened? Lauren Jeffrey presented our first ‘ask’: we wanted to cite him as a supporter of Climate Income and of our campaign, as we took it national through the network of chapters that make up Citizens UK. Would he consent to this? The reply was immediate – yes indeed (and without us needing to clear statements through his office in advance).
Then our second ‘ask’: would he invite us to the Lords to a meeting, whether formal or informal, as he thought best, to help increase understanding and support for Climate Income among parliamentarians?
Again he replied positively, though not unconditionally. Characteristically thoughtful, he said he needed time to consider when and how the meeting could best be ‘anchored’ in the processes of the Lords (and its Climate and Environment committee in particular – of which he is a member). Then he gave us an important and unexpected bonus – direct access to his two advisors (both of whom were clearly willing, thoughtful, and very well informed on Parliamentary processes as well as climate issues).
It was an intense two hours including some lively exchanges around how to bring the need for rising carbon prices into the policy process and public debate. We left feeling tired but elated. We had an important ally for what we see as our next steps – both locally, and working across the Citizens UK network to spread this word and bring other chapters on board, turning it into a national campaign. All that is needed is lots more hard work! – if you might like to be involved, please get in touch.
CCL member Rob Paton explains how Climate Income can be used as a solution to the fuel price crisis as well as the environmental one.
1 The fuel poverty facing many households and the climate crisis facing us all must be tackled in synch. If they are not dealt with together, each problem worsens the other. Fuel poverty, accentuated by a price spike, has led to calls questioning support for renewable energy and has clear potential for social and political instability. Yet the necessary action on fuel poverty must not be at the expense of the climate. Households on benefits, or with low and insecure earnings, will be the least able to protect themselves from the consequences of weaker climate policies.
2 Fuel poverty should be addressed primarily by increased income, not reduced fuel prices. What those in fuel poverty need is more money. They know their priorities. And it must be money they can rely on – not complicated special payments, or means tested and arriving late to tackle a spike in prices..
3 What businesses and our economy need for the transition to zero carbon is an underlying trend of rising carbon prices. Economists and business federations agree on this. Most businesses can deal with price fluctuations, or are learning how to. Carbon subsidies and tax reliefs are a part of the problem not part of the solution.
4 The direction of travel for public finances should be away from the present high degree of carbon reliance and towards sustainable, post-carbon sources of revenue. An overhaul of the UK’s current mish-mash of fossil fuel taxes and subsidies is long overdue. A coherent approach would raise more funds, be fairer and simpler, support the drive to carbon neutrality. This is bound to take time – so the sooner the taxation system starts down this road the better.
5 Likewise, the direction of travel for income support during the great transition should be from indirect to direct payments. That is, from transfers hidden in a tax or benefits system to discrete, climate-related payments, labelled as such and paid directly. Citizens need to know that they are being supported in tackling the climate crisis, and enabled to play their part.
6 Consistent policy on carbon pricing, fiscal reform and income support requires a cross-party political consensus. Surveys have repeatedly shown that the public mood is to find and sustain the common ground, and to get on with the job. Political contestation on other issues – including other climate and environmental policies – can and should continue, both locally and nationally. But a framework to tackle the great work of this decades-long transition is needed. These are three essential elements for such a framework.
7 Communicate, communicate, communicate. Public trust in politicians needs to be restored if sometimes unpopular policies are to be sustained. A cross-party consensus in Westminster needs the backing of public opinion, and its calls will be taken more seriously by the public than party-political pronouncements. Especially when promised action follows. Nothing is clearer and more convincing than a payment direct to your bank account.
Climate income offers a way forward with the clear potential to satisfy all these principles. It may not be the only one. But it is the only one I am aware of.
Rob Paton 02/02/22
We are not the only ones with this message, today’s Carbon Brief Daily reports on two interesting reactions to the Levelling Up White Paper (Business Green is paywalled) ..
Business Green’s James Murray, analysing the paper, writes that “a government that properly prioritised the net-zero transition, rather than treated them as a separate silo, would find it much easier to embed climate action in its response to the gas price crisis.”
In another comment on levelling up in Business Green, Prof Henrietta Moore writes that “without tax reform, the cost of funding net-zero will fall disproportionately on the shoulders of those least able to afford but most likely to suffer the consequences of a rapidly degrading environment”.
Happily the fuel price crisis mitigation measures announced by Rishi Sunak today do not involve tinkering with carbon pricing and leave all to play for!
Last year Rob Paton and Citizens:MK succeeded in gaining unaminous support for Climate Income from Milton Keynes Council. Rob then went on to write about the campaign in the national Quaker magazine, The Friend.
Rob has now succeeded in getting a full article published which he has given me permission to reproduce here. I attended a Zoom meeting organised by Rob for a local climate group and was able to see the issues people have with the concept of CI (which it is easy to lose sight of when you have been immersed in the campaign for three years!) which Rob describes – his approach has lessons for us all! Note that ‘testimony’ refers to the Quaker values of equality, peace, truth, justice and simplicity.
A year of climate campaigning: What Rob Paton learned
6 Jan 2022 | by Rob Paton
‘It’s often the testimony that does it.’
‘The alternative is to look for common ground.’ | Photo: by Li-An Lim on Unsplash
I had been a ‘greenie’ for years, but not heard about Carbon Fee & Dividend (also known as Climate Income) until a Friend told me about it a couple of years ago. I visited the website of Citizens Climate Lobby UK – and wow! So simple. An arrangement that would turbo-charge all other carbon reduction policies, or render them superfluous. A way to make higher carbon prices not just acceptable, but popular. Like every good convert I set off with missionary zeal. At which point things became… interesting.
Yes, sometimes people ‘got it’ quite quickly. What really struck me, though, was how often people didn’t (or couldn’t?) ‘get it’. For example, when another Friend passed on something I had written to her daughter, active in XR, the daughter was enthused. She shared it in her circle… to no avail whatsoever! Even professional campaigners who knew their economics seemed to ignore carbon pricing. It was the elephant in the room. As for Climate Income, well, on a good day it would be damned with faint praise. I asked several: ‘What should we be asking for at COP26? Wouldn’t it be great if we had one simple, specific “ask” that everyone could get behind, like “Drop the Debt”?’ Everyone liked the question, but their answers were either lengthy, or pithy but plaintive (‘just keep your promises’). No one expressed much interest in Climate Income. Gradually I came to realise – or re-learn – some important lessons.
If people are not open, or ready, then I was probably wasting my time as well as theirs. It wasn’t just that trying to persuade people seldom helped. Things went better when people were stimulated to find out for themselves. For example, our local Citizens:mk climate campaign asked the leaders of the three main parties on Milton Keynes Council to consider supporting the idea. Initially, all were wary, but they agreed to check it out. When it came to the debate, genuinely enthusiastic speeches in support came from all sides, and the motion passed unanimously. Likewise, when we asked the local Anglican bishop to consider the idea and how he might use his position to promote it, he was sympathetically cautious: he would meet with us but the issues were complicated and he needed to find out more. But then before we knew it he was on board, asking a pointed question in the House of Lords!
That illustrated another important point: it’s often the testimony that does it. A remarkable teenager in our campaign group had recounted being confronted with the harsh realities of what climate change would mean for her and her generation. She spoke simply, clearly and from the heart. It was moving and memorable in a way that bald facts and reasoning are not.
I also noticed how widespread adversarial thinking is among green campaigners. The default stance is to campaign against things – and people. When I asked what was needed for a consensus in support of cutting out carbon, the answer was, essentially, for lots more people to care like we do. We have seen the light; we must convert others to our way of thinking. Worse still, I, too, slipped into adversarial thinking. At one point I was seeing the Treasury as a bogeyman. They didn’t like hypothecated taxes and would be bound to resist this idea. But one of the beauties of the arrangement is that it is revenue neutral – it is a transfer rather than a tax. It doesn’t add to government spending. Better still, by turbo-charging the switch to renewables, it reduces the need to subsidise green technologies which are a drain on the exchequer. It also gives a further basis for cutting out those subsidies still being paid to fossil fuel companies.
The alternative is to look for common ground. Climate income provides such a common ground, securing support for long-term carbon reduction. In Canada, where this ‘fee & dividend’ approach has been adopted, governors of some provinces with high levels of fossil fuel activity thought they might roll back the legislation… until they found how popular it had become with voters.
What really took me by surprise, though, was the way climate lobbying led into a deep consideration of truth, and our compromised capacity as humans to face it. I joined a Zoom course on how to engage with political leaders on climate issues. At one point the young course leader said words to this effect: ‘Look, we have enough information in this group to plunge half the country into a state of deep clinical depression. It’s just as well that many people are “in denial” – the health services would be overwhelmed if everyone suddenly woke up to what the disaster will mean for them. That wouldn’t do the planet any good.’
Instead he introduced us to ways of meeting our leaders where they are, helping them recognise their own ambivalences and uncertainties, and helping them find their own safe next steps. This doesn’t mean that we should only engage with the political system in therapeutic mode – listening supportively, asking gentle questions, building trust. As we Quakers know, discernment requires threshing as part of the process. So explanations, facts, clarifications and analysis all have their place, collegially conducted, among those seeking further understanding. Here too I learned lessons.
I had to treasure the disagreements and challenges I encountered. They were informative about what I had not explained. For example, if someone said, ‘Won’t people just use all their climate income paying for the higher price of fuels?’ I had to be ready to agree: yes, some would, to begin with. It would be their choice. Only then would it be worth my explaining how the steadily-increasing price of carbon (and climate income) would play out over the medium term: the higher the price the more incentive everyone has to switch to green alternatives. Instead of it being against our economic interests to ‘do the right thing’, we become (even) better off by ‘doing the right thing’.
Another example: one councillor said we shouldn’t increase the price of fossil fuels until the cost of green alternatives had fallen to the level of current fuel prices, otherwise the poorest would be hard hit. This overlooks how climate income protects the least well off. But I sensed something else was confused in this observation, and it took me time to pin it down. In fact, the price of the alternatives will not fall until they are adopted on a large scale. So we need to make the green alternatives cheaper than fossil fuels in order to bring about large scale adoption. This is precisely what steadily increasing the price of carbon makes happen.
I also came to appreciate the uncertainty in our predicament: no one knows what will be an achievable and sustainable mix of green fuels. The technologies are still a big cloud of unknowing. Some say heat pumps. Some believe hydrogen is the answer. According to others, the future is electric. Some think that Carbon Capture and Storage is crucial. Each of these has its advocates – and, happily, investors willing to back them.
Finally I have had further lessons in patience and trust. Having been through panics about nuclear war, the scares about the millennium bug, and the fear that oil was running out, it is a little easier to hold my nerve. Yes, I do know about tipping points. The dangers are very, very real. But so are the emerging opportunities with many signs that the tide has turned. And so we choose life, doing what we can where we are.
First, introduce a carbon tax across all industries to price emissions into the market, closing a huge economic loophole. By gradually increasing the tax, we not only incentivise lower emissions on the supply side, but we also drive demand for low-carbon alternatives.
Second, redistribute the revenue equally to all citizens. This protects the most vulnerable consumers, who already have smaller carbon footprints, from fuel poverty. The wealthiest people with the biggest carbon footprints would see their costs rise, but for the majority, costs would be neutral.
Third, introduce carbon border adjustments. This policy would prevent emissions being transferred offshore, but also protect many UK businesses, especially our vibrant small business community, from competitors in countries without a carbon tax. This policy would help drive many of the others at a time when we need real urgency. Darrin Charlesworth Citizens’ Climate Lobby UK
Congratulations Darrin for succinctly and elegantly summarising how Climate Income would enable the true price of carbon to be reached – thus making decarbonisation a no brainer without impoverishing everyone!
On November 1st the much anticipated debate on the Zero C petition was held in a extremely uncrowded Westminster Hall. Catherine Mckinnell (Newcastle upon Tyne Central, Lab) moved the petition, stating that its aim is to impose a single carbon price across all sectors. ……
In its simplest terms, the petition calls for the Government to work towards a single carbon price across almost all sectors. The campaign argues that a single carbon price would amalgamate the many existing price instruments, including the carbon price support and the UK emissions trading scheme—a different form of carbon charging—into a simple, transparent carbon charge. Zero Carbon points out that our current policies cover emissions across only about a third of the economy, giving the biggest polluters free allowances while the consumers are left to pay. I pay tribute to the petition’s creator, Isabella Goldstein, who is the senior campaign manager at the Zero Carbon campaign.
The theory behind this form of carbon charging is straightforward. If we had, for example, a single carbon price of £75 per tonne of CO2, it would incentivise people and businesses to pursue any methods of emission reduction that cost less than £75. Hon. Members will be aware that we are far from having a single carbon price across sectors. Instead, we have a patchwork of policies that incentivise or disincentivise emissions in ways that are often unclear. While overall they have the effect of, for example, discouraging the burning of fossil fuels, the cost varies hugely depending on the source of the emissions. It is argued that the key benefit of working towards a uniform carbon price is that it avoids a situation where some sectors face higher carbon prices, and must therefore make more expensive carbon reductions, while others could more easily and cheaply reduce their emissions but do not.
Mckinnell also pointed out that Zero C are asking for the policy to be fair and equitable…
Alan Brown (Kilmarnock and Loudoun, SNP)……In a similar vein, I represent a former coalfield area. Carbon taxes had been applied to the extraction of coal over the years, but a few years ago, when the open-cast coal industry collapsed in my constituency, it left massive craters that needed reinstatement work at a cost of millions of pounds. Carbon taxes came from my constituency to the Treasury, but they just went into the black hole. When we asked for assistance for restoration work on those abandoned coalmines, the answer that came was, “No. Too bad. That money came in and it has been used. There is no money coming back to your constituency. It doesn’t work that way.” That shows the folly of not ring-fencing a tax for the purpose that it should be ring-fenced for. Again, transparency is utterly critical if we are to go forward.
Jerome Mayhew (Broadland, Con) argued cogently for a Carbon Border Adjustment Mechanism policy, as he has been championing for a while. There was interest in CBAM earlier this year but in July the Board of Trade published a report extolling free trade as the answer, the subject is still under review.
Unfortunately although the speakers all argued that carbon pricing was necessary and should be fair there was no discussion on how to implement it, such as suggesting a solution like Climate Income. The argument for a single uniform carbon price wasn’t really debated, instead the arguments were vague, focussing on stating that the Net Zero Strategy isn’t doing this, that or the other, our party would spend more and be more equitable than the government and when will the ETS net zero consistent cap be announced.
This line of arguing therefore enabled the financial secretary to the treasury, Lucy Frazer, to argue that while “The petition specifically calls for a carbon charge to encourage industries and organisations to reduce their carbon emissions” the government is already doing this through the UK ETS scheme and Carbon Price Support, but she didn’t feel the need to address the petition’s main ask as no-one else had been discussing it.
In summary the gist of the petition, arguing for a single, uniform carbon price seems to have been lost in the discussions about other aspects of the Net Zero Strategy and finance.
One has to wonder if the timing of the debate, falling as it did during COP26, inevitably led to the paucity of ideas and discussion, with no-one from the government, for instance, discussing the ideas leaked in July!
