UK should increase climate change levy to lead G8 by example

The UK Government should get its own house in order and increase the climate change levy if it is to be credible in leading action on climate change through the presidencies of the G8 and the EU, a thinktank report has stated this week.

Accusing the government watering down UK commitments under the EU emissions trading scheme after caving in to pressure from business lobbyists, The Burning Question report from the Institute for Public Policy Research (IPPR) recommends an annual increase in the climate change levy to double it over the next five years.

The levy has not risen since its introduction in 2001. The report quotes the government's own assessment that the levy is set at only around half the true social cost of pollution. It recommends any rise be matched by a cut in employers' National Insurance contributions and extra funding for business energy efficiency programmes through the Carbon Trust.

The IPPR say their research indicates that it would be in industry's long term interest and that a phased increase would allow businesses to plan for change.

Dr Catherine Mitchell, co-author of the report ad Principal Research Fellow from Warwick University said: "Development of the UK as a low carbon economy requires fundamental changes to the energy system not just tinkering with the existing structures. Government needs long term policies to support decentralised low carbon generation and intelligent energy use."

"Market mechanisms alone are not enough. Where there are conflicts between short term competition policy and long term climate policy, then climate must take precedence."

In addition to the increase in the climate change levy, the report recommends:

  • An increase in Vehicle Excise Duty differentials so more efficient vehicles pay less;
  • The inclusion of aviation in the emissions trading scheme;
  • A target for the installation of 'intelligent meters' to optimise energy use and allow electricity generated at home to be sold to the national grid;
  • The adoption of Scandinavian energy efficiency standards for all new buildings and a target of zero net emissions by 2015;
  • New obligations on energy companies to supply a proportion of renewable heat and combined heat and power in addition to the renewable electricity obligation; and
  • Extra support for emerging renewable energy technologies such as wave and tidal power.

    "The UK's business lobby must not be allowed to stand in the way of tackling the most serious long term global threat to humanity. Making climate change one of his major priorities for his leadership of the G8 and the EU is a bold move by Tony Blair. But he will find it difficult to persuade other world leaders to sign up to ambitious commitments if he cannot show that Britain is leading by example," said Tony Grayling, IPPR associate Director.

    By David Hopkins

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