Dec 2009 16

New Research: Ending the Green Rip Off0

As the Copenhagen summit draws to a conclusion, the TaxPayers' Alliance estimates the excessive burden of green taxes and regulations in every local authority

  • Green taxes have risen to £26.4 billion in the last year.
  • That is up £1.7 billion from £24.7 billion in 2007/08.
  • The total cost of Britain’s emissions was £4.6 billion in 2008/09 under the IPCC estimate of social cost.  
  • That means green taxes were excessive by £21.8 billion in 2008/09 under the IPCC estimate of social cost.  

The TaxPayers' Alliance (TPA) today releases a groundbreaking report on the burden of green taxes. Against a backdrop of tough economic times and a Copenhagen summit that is rapidly descending into discord with major walk-outs, the TPA reveals just how much Britain is overpaying for its carbon emissions.

Efforts to reduce greenhouse gas emissions have been a priority for governments of both parties for a number of years.  The direction of policy over the last 18 years has been fairly consistent: increasingly ambitious targets to cut emissions, an increasingly high price on emission through taxes or regulations and support for renewable energy. In recent years, Britain has adopted extremely stringent policies along these lines. Unfortunately, these policies are already imposing a huge, excessive burden on ordinary families and firms.  That burden is falling particularly on those with low to middle incomes, as they spend the most as a share of their income on goods like electricity whose price is pushed up by green taxes and regulations.

Read the full report here (PDF).

Key findings:

  • The burden of green taxes and regulations, net of road spending, in 2008/09 was £26.4 billion.
  • That is up £1.7 billion from £24.7 billion in 2007/08.  The rise is driven by an increasing price on emissions under the European Union Emissions Trading Scheme and an increase in the cost of the Renewables Obligation, both of which increase electricity prices.
  • There are a number of different estimates of the “social cost” of a tonne of greenhouse gas emissions; this report uses estimates from senior academics and organisations like the IPCC and DEFRA.  
  • The ‘per tonne’ estimates in those reports suggest the total cost of Britain’s emissions was between £2.8 billion and £16.2 billion in 2008, the estimate under the IPCC social cost was £4.6 billion. 
  • Green taxes were therefore excessive by between £10.2 billion and £23.6 billion in 2008/09, the estimate under the IPCC social cost was £21.8 billion.  
  • Excessive green taxes and regulations therefore cost between £408 and £944 per household, the estimate under the IPCC social cost was £872 per household.  
  • The cost of climate change policies that is excessive has risen from between £8.4 billion and £21.8 billion in 2007/08, and £20.1 billion under the IPCC social cost.
  • Estimates for all UK local authority areas are provided.  Those estimates show that the burden varies significantly, with rural areas like Maldon paying as much as £622 per person in excess green taxes and regulations in 2008/09 under the IPCC estimate of the social cost of carbon, and urban areas like Camden paying less, at £136 per person.  

Download the full report here (PDF)

Matthew Sinclair, Research Director at the TaxPayers' Alliance said:

“Families up and down the country have been over-charged on everything from turning on the TV to flying abroad, all for the sake of ineffective green taxes and regulations. Rising electricity prices have hit the poor and elderly in particular, and their cost is expected to increase massively in the years to come, creating an affordability crisis as energy costs rise and ordinary people face intolerably large bills. At the same time, green taxes and regulations push up energy and transport costs for businesses, which makes it harder for British factories to compete and means manufacturing jobs moving abroad. Politicians need to re-think climate change policy to reduce the burden on consumers and taxpayers. People are not willing to accept an increasingly high price for draconian policies that aren’t delivering results.” 

Getting green tax data for your area 

1.  Download and open the spreadsheet: http://www.taxpayersalliance.com/greentaxdata.xlsx 

2.  Select the social cost estimate you want to use.  Click on cell A4 and choose from “Nordhaus”, “IPCC”, “DEFRA” and “Tol” in the drop-down list.  The IPCC estimate is the central projection we have used in our summary.  The national estimates on that sheet will then reflect the social cost estimate chosen.

3.  Select the local authority you wish to get an estimate for.  Click on cell A24 and choose a local authority from the drop-down list.  The local estimates below that will then reflect the council chosen.

4.  If you want to see more detail, including the estimates of how much individual green taxes raise in the selected area and the calculations then click on sheets "2007" and "2008" at the bottom of the spreadsheet.  Those sheets show all the councils and provide a full breakdown, they will reflect the social cost estimate chosen in Step 2 and displayed in cell A4.

Analysis and Recommendations

Increases in energy prices are regressive, hitting the poor and elderly hardest, increasing poverty and benefit dependency.  The poorest income decile spend three times as much, as a proportion of their income, on electricity as the richest.  Over 75s spend twice as much on electricity as the under 30s.  Increases in energy costs also undermine the competitiveness of British industry and cause jobs to be lost and emissions to be moved abroad instead of cut.  Britain has among the highest tax components in petrol and the highest tax component in diesel prices in the EU15, pushing up transport costs.  Climate change policies already constitute 21 per cent of average industrial bills.

Our paper recommends a range of measures should be taken to improve the situation, particularly:

  • Leave the Emissions Trading Scheme and replace the Renewables Obligation with a technology-neutral Low Carbon Obligation, which would allow lower cost, low carbon sources not classed as “renewable” to be used.  This is likely to cut electricity bills by 10 per cent or more from their likely level under current policies by the end of the next Parliament, and as much as 50 per cent by 2030.  The corollary of this is that the existing 2020 targets should be abandoned as unhelpful and counterproductive.
  • Invest in technological development using money saved by cutting existing and ineffective climate change spending.  This will help reduce emissions not just in Britain but also globally. 
  • Focus transport policy on delivering maximum capacity with scarce resources by focussing investment on the road network and commuter rail, which move the most passengers. 

Related Posts