We're already paying for carbon- and we're paying too much.

Today yet more “the polluter should pay” rhetoric is buzzing around the British policy domain. Everyone is waiting for Lord Smith, the Environment Agency’s chairman to suggest that individuals should be given an annual carbon ration and face financial penalties if they exceed it.

The rationing scheme will be based around individuals being allocated a carbon account with a unique code which will have to be quoted when buying products such as petrol, electricity or airline tickets. Lord Smith thinks that rationing is fairer than taxing carbon because increasing taxes could make activities more expensive.

This is true and obviously the Taxpayers’ Alliance would oppose any form of higher tax on carbon. However this scheme’s fundamental flaw is that it forgets how much Britons pay for carbon already, which is consistently higher than the social cost of carbon.

For example under this scheme when an individual buys petrol a certain amount of their carbon allowance would be used. Theoretically this would discourage people from using high levels of petrol in order to keep their carbon allowance for other activities. Those people who use large amounts of petrol and exceed their allowance will be hit by a financial penalty.

Lord Smith hasn’t made it clear what will happen if people who have allowances left at the end of month. An allowance trading scheme would be too complicated to sustain. For that reason, initially the rationing scheme won’t affect low emitters, meaning that emissions cuts aren’t made where they are most affordable.


Lord Smith stated

‘A lot of people who do cycling will get money back. It will probably only be bankers and those on extravagant lifestyles who would lose out.’ 

But this position is incredibly misguided as ordinary families spend, as a share of their income, more than the rich on things like motor fuel and electricity.  The carbon products being targeted under this scheme are used by ordinary taxpayers and are necessities in their everyday lives.

Did Lord Smith forget that the cost of buying petrol and paying Fuel Duty and VAT on that purchase already encourages drivers to limit their consumption of petrol? Britain’s fuel duty is one of the highest in Europe. Therefore drivers are discouraged from using excessive amounts of petrol and those who do pay more fuel duty. In fact our research shows that drivers already pay £18.4 billion over the social cost of road transport greenhouse gas emissions and road spending.
Similarly our research shows that excessive green taxes drives up the price of electricity, which hits the poor and individual incomes hardest as they spend more of their gross income on electricity. Climate change regulation makes up 14 percent of domestic electricity bills and 3 percent of domestic gas bills.

This encourages poorer households and the elderly, in particular, to keep their homes at lower temperatures during winter months, which contributes to excess winter mortality. If a rationing scheme was introduced that would make the situation even worse, if a poor elderly person runs out of permits then they might be forced to choose between turning off their heating – with huge risks to their health – or facing a financial penalty that could leave them destitute.

“Polluters” are ordinary families and manufacturing industries.  They already pay more than enough to drive, heat their homes and do other things that create carbon emissions.  Rationing would be a completely unacceptable addition to that burden.

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