The new proposal from the Treasury to tax companies that introduce fossil fuels into the UK economy, which is at the heart of the current consultation on UK energy policy, has come under attack – by a group proposing that fuel supplier sales are controlled – but by a permit scheme that benefits the public, not the Treasury.
Under the Treasury's proposals, a single pensioner's fuel bill could rise by between 16% and 35% in 2020. Critics say that to compensate people for such bill increases, the cash should instead go to households.
The criticism comes from a group advocating Cap and Share, a policy measure which the Irish Government was giving consideration to trialling before that country's fiscal crisis. They call Cap and Share "a simple solution to climate change that is easy and relatively cheap to implement and puts cash in the hands of every citizen".
Just as with the Treasury's new proposal, Cap and Share argues that it's easier to cut down on the fossil fuels entering the economy than for each citizen to cut their individual use, and they think the 255 companies responsible should therefore pay for the right to pollute.
If they can be made to buy permits, as under the EU Emissions Trading Scheme, and the government issues only sufficient permits to match the country’s target CO2 emissions, reducing them year on year, this provides the cap.
The 'Share' part of 'Cap and Share' entails that all households would each receive an equal share of the permits which they may then sell to the fossil fuel companies. This would put cash in their pockets to compensate them for higher energy prices.
In other words the proceeds of the Fossil Fuel Levy - at a projected average £30/tCO2 - would come to households, not the Treasury.
Richard Douthwaite (author of The Growth Illu$ion: How Economic Growth Has Enriched the Few, Impoverished the Many and Endangered the Planet) says that Cap and Share is based on the Commons principle, and assumes that everyone has an equal share in the atmosphere.
As the Carbon Trust knows from experience, the most popular and successful climate-friendly policies are those which also save or give businesses and householders money.
By contrast, explains Cap and Share spokesperson Brian Davey, the EU Emissions Trading Scheme has seen allowances to pollute - carbon credits - given away to the big greenhouse gas-emitting companies, which they have been able to sell on and generate profits for themselves. In the case of the energy companies, they have also posted huge profits.
Davey and Douthwaite believe that on the other hand, if this benefit were split between every adult in the country, it would be both fair and popular.
Davey said, "With the perception that most climate change legislation is punitive and restricting freedom fuelling wider public scepticism of climate change, such a move by the Government could help swing public opinion back to favour the green economy."
Davey argues that the Treasury's proposal has not been thought through in its relationship to the EU ETS. "It is being made due to the failure of the ETS to provide sufficient stable incentives for the development of renewables. It's not just the low price of carbon but its volatility and unpredictability.
"However the criticism of the EU-ETS is muted and fudged. The result is that the proposal is to impose the scheme in addition to the ETS, but the interaction effects on an unreformed ETS are likely to be counterproductive.
"It is admitted in the Treasury document that the new scheme would likely lead to a fall in the demand for ETS permits and thus a fall in the ETS price but the implications of this are glossed over (in paragraph 5.24)," he continued. "Put bluntly, wWithout tackling the ETS, a rise in the UK carbon price may be matched by an offsetting fall in the European carbon price. What is needed is a revisit of the whole EU-ETS, which has been a complete disaster".
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