New research: Emissions Trading Scheme costs consumers £3 billion a year

A new report (PDF) from the TaxPayers' Alliance (TPA) reveals the high costs being imposed on British and European consumers by the European Union Emissions Trading Scheme (ETS). The ETS is intended to reduce carbon emissions across Europe by increasing the cost of energy for households, businesses and other organisations. This increases household bills, but also increases business running costs and the cost of running public services such as hospitals.

As well as calculating the cost of the scheme, the report investigates the flaws in its design and function. These include the problem of the burden falling disproportionately upon the poor, the highly volatile price of carbon emissions under the Scheme and the failure of the Scheme to properly balance the social costs of carbon emissions with the cost of reducing them.

The full report is available online here. 

Key Findings

•    The Emission Trading Scheme cost British consumers nearly £3 billion in 2008, equivalent to around £117 per family, by increasing the cost of energy. The report also presents estimates of the cost to consumers in every country participating in the scheme, in each year of the scheme’s operation.

•    From its introduction on 1st January 2005 to the end of 2008, our central estimate of the Scheme's cost to consumers across Europe is £67 billion (€93 billion). That is equivalent to around €185 (£132) for every person in the ETS participating countries

•    Some countries' energy markets pass on these costs to consumers at different rates, meaning that at best the Scheme cost around £33 billion (€46 billion) and at worst £83 billion (€116 billion).

•    New evidence uncovered using the Freedom of Information Act shows that the British Government has not just accepted this significant burden on consumers, but has actively worked to increase it. Despite continuing rhetoric about reducing fuel poverty, the Government in fact spent £42,899.69 of taxpayers’ money to assist the European Commission in legal attempts at the European Court of Justice to forcibly reduce the supply of emissions allowances and thereby increase the emissions price further. 

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

“The EU Emissions Trading Scheme has cost ordinary families billions, while energy companies have made huge windfall profits.  Despite that, it has failed to produce a stable carbon price, leaving consumers with an unpredictable addition to their bills.  Manufacturers already struggling to compete with emerging economies like India and China cannot cope with such a substantial addition to their costs, and driving them abroad won’t help cut emissions but will mean fewer jobs in Britain.  The Government claim to be against high energy prices but then embrace policies like this and even use taxpayers’ money to support European Commission legal cases which threaten to increase the bill to British families further.  The EU Emissions Trading Scheme has been an expensive failure and should be abolished.”

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