What do you think of the government’s carbon tax on energy generation? Not only could it become another burden on already squeezed households, we don’t think it will work in promoting low-carbon energy.
The ‘carbon price floor’ is a tax that energy firms will have to pay if they use carbon-intensive methods of generating energy, like coal. In turn this is intended to encourage these companies to invest in low-carbon energy, such as nuclear and wind.
However, we don’t think it will achieve its aim of encouraging significant new investment in low-carbon electricity, and we worry it will hit cash-strapped households at a time of rising energy prices.
A tax on energy customers
The government’s own figures suggest that the tax, due to start in April 2013, will add around 1-2% to electricity bills in 2013, rising to as much as 6% by 2016.
We’ve estimated that this could add £278 million to household electricity bills in the first year alone. This is at a time when bills are steadily climbing.
We think the UK needs to work towards a more sustainable mix of energy in the future. We’re also not opposed to carbon pricing in principle. However, we think this would be more effectively pursued by strengthening the EU Emissions Trading Scheme. Our main concern is that this carbon tax won’t work.
We don’t think it will provide confidence for long-term investors in low-carbon power because it’s subject to a review at every annual Budget. Plus, it’s unclear why the government sees this tax as necessary when other Energy Department policies intended to promote low-carbon power are already in the pipeline.
Chancellor, scrap the carbon tax
People are already struggling to manage their energy bills. It’s unacceptable for the government to pile yet more pressure on household budgets by introducing a new tax policy that won’t even deliver investment.
So, a decision by the Chancellor to abandon this unnecessary measure in the forthcoming Budget would send a clear signal that consumers are at the heart of the government’s energy policy without having a detrimental impact on investment in future low-carbon generation.
It’s in all of our interests to tackle climate change, but the government cannot write a blank cheque on behalf of consumers to pay for it.