Trewin's Blog

Trewin's blog

Trewin's blog


Will there be an EU Carbon Tax? 01.02.11


Will there be an EU Carbon Tax?

It is a thought that will get Euro-sceptics charging to their keyboards with disgust, but the EU taxation commissioner, Semeta Algirdas, has confirmed that the European Commission is preparing a proposal for an EU-wide carbon tax.

The commission says the complexities of fuel duty levels and exemptions across states threatens trade distortions and is looking for simplification. The proposal will be released in the first half of 2011 and will cover sectors such as transport and agriculture.

The commission is spot-on in its analysis. There have been many media stories of hauliers telling their drivers to fill up with diesel before returning to the UK due to massive price variations. The UK business leaders that we talk to constantly plead for a simpler and sturdier system for taxing carbon which will enable them to make long-term investments and avoid needless bureaucracy.

The timing of the announcement couldn’t come at a more sensitive time with every indication that George Osborne will not introduce the next phase of the fuel escalator in the face of a highly effective and articulate fuel lobby. Rather than fretting over this decision, his efforts would be better spent helping people transition more rapidly from such a high dependency on fossil fuels.

New technologies, behaviour change initiatives and financial incentives could ease the pain that will inevitably be felt as fuel prices rise. Given this need, it was disheartening to hear that around 100 jobs are to go at the Energy Saving Trust as part of Government cuts. Another plank of support that has been removed from our journey to a low carbon economy.

The real fairness agenda

Over the past year we have helped over 400 young people to develop their vision for a Sustainable UK in 2020. Through our Climate Squad initiative, they have created something highly positive and compelling but we wondered whether the group truly represented the views of their peers. To check, we commissioned YouGov to ask 1,000 other young people what they thought of the vision that had been created.

The response has been fascinating and has given us a unique overview of what young people think about issues such as population control, GM, being asked to eat less meat and to curtail the amount they fly.

We will be releasing the results at an event on 24th February where we will be sharing the findings with leading companies who we feel will be interested in hearing the thoughts of future customers and employees.

This is one of the most important pieces of work undertaken by Global Action Plan.  I constantly hear politicians, business leaders and others tell us we have to cut carbon emissions by 80% by 2050.  What they never do is explain what impact this will have on the lifestyles and choices of people who will be alive at that time. Our research suggests that some of the possible changes will be deeply unpopular.

Using the 2050 timeframe also neatly makes the problem seem relatively long-term. What is not pointed out is that every tonne of carbon we needlessly pump into the atmosphere now will make the scale of change required ever more painful for future generations.

Perverse Incentives

It is ironic that at a time when people are squealing about rapidly rising energy prices a survey by ENDS magazine of the gas and electricity tariffs offered by the ‘big six’ energy companies has found that the more power and gas households use, the less they pay per unit of energy. Basically high polluting households have less price incentive to save energy than those who are more frugal.

Tariffs which penalise wasteful energy consumers are used in other countries to encourage energy efficiency but none exist in the UK. These ‘rising block tariffs’ are fairer and greener but any energy company that introduced them on their own volition would probably lose market share.

It therefore falls to either Ofgem or DECC to introduce the change. For guidance, they could take a look at what Ofwat is doing as it favours innovative tariffs and three water companies have already trialled rising block tariffs for water use.