As a tax on energy, rather than greenhouse gases, the Levy is not a cost-effective way of cutting carbon dioxide emissions, says Chair of the report’s working group, Sir Eric Ash. It does not apply to domestic and transport fossil fuel use, but at the same time, it penalises electricity sources such as nuclear generation which, however controversial, does not produce greenhouse gases.
The group is calling for a tax on all carbon dioxide emissions equivalent to one penny per kilowatt-hour of electricity or six pence per litre of petrol, or a system of tradable permits to control the amount of gas released, says Ash. An increase in fuel tax is likely to be unpopular as British drivers already pay some of the highest fuel prices in Europe (see related story).
Whatever system is adopted, it should be brought in gradually, giving industry time to adjust, but should eventually extend to all European Union countries – or even beyond.
The group points out that the poor in society should not be penalised by a climate change tax. However, they should not be shielded from it, but compensated, says the report.
A tax or trading system for greenhouse gas emissions would also significantly affect energy intensive industries. In the case of the current Climate Change Levy, these industries have been shielded from the full force of the tax (see related story). However, such shielding under either a tax or tradable permit scheme should be time-limited, and should be transparent in the form of explicit subsidies, says the Royal Society. The intention of the proposed schemes is that the price of carbon-intensive products should reflect their climate cost.
“The UK’s carbon dioxide emissions have started to rise again,” Ash warns. “If the Government’s white paper misses the opportunity to reverse this trend, the UK could hasten the onset of potentially catastrophic climate change.”