Failing energy policies are expensive: why Britain needs to open the debate on emissions regulation

Britain must open the debate on emissions taxes and regulations that other Anglophone countries have been engaging in for years.

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Blue sky thinking: do emissions regulations work?
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Matthew Sinclair
On 15 August 2011 12:49

In Australia they are currently having a fierce debate over the introduction of a carbon tax. The centre right Liberals deposed their leader over the issue and now vigorously oppose it.

In Canada the Conservatives defeated their centre left Liberal party’s plans for a carbon tax at an election, rightly calling it a ‘tax on everything’ and winning more seats. In the United States cap and trade proposals couldn’t pass the Senate after Representatives who voted for it in the House found themselves on the end of a popular backlash.

In Britain we've never had that kind of debate but at some point we need to. We have got to start judging regulations and taxes that are supposed to limit greenhouse gas emissions by the same standards applied elsewhere: Are they affordable? And do they work?

That is the subject of my new book: Let them eat carbon.

Many people will never even have heard of the European Union Emissions Trading System or the Renewables Obligation. Those regulations and similar measures already add a substantial amount to their electricity and gas bills anyway. Over the next decade the cost will mount and Citigroup expect a more than fifty per cent, above inflation, rise in bills.

Budget after Budget, Chancellors have stood up and talked about how they are going to introduce new taxes or hike existing ones in order to reduce emissions. The end result is green taxes charged at far above the level that can be justified by the need to pay for the roads or the expected harms from climate change. Those taxes were excessive by more than £500 a family in 2010.

Many people might like to ignore climate change policy in favour of other priorities, like bringing down the deficit. But other objectives will be compromised by expensive attempts to cut emissions.

Cutting spending while the poor and elderly families who rely the most on benefits are also hit the hardest by rising energy bills will be a nightmare. Trying to ensure more balanced economic growth after the financial crash will be much more difficult if rising energy costs make it harder for manufacturers to keep production and jobs in Britain. Energy intensive industries - which can't compete if energy costs rise sharply here compared to in competing economies - employ 225,000 workers according to a report by the Energy Intensive Users Group and the TUC.

With Britain a paltry share of world emissions, we achieve nothing acting alone. Imposing hardship on families here and driving industries abroad is completely counterproductive. Other countries aren't going to follow that dismal example and unbalancing the world economy, so there are more manufacturing workers in China who stand to lose if they adopt similar policies, will make it more politically difficult for them to emulate what we are doing.

The critical weakness of the current approach is that it is about trying to tax, subsidise and regulate existing, and inadequate, alternatives to fossil fuels into action now.  Or to fit the economy within the limits that environmentalists think have to be placed on growth.

Even if we in Britain are prepared to stomach more expensive energy, the major developing countries that emit far more won't. It would be much better to take a realist approach to this problem, based on research to get new alternatives; adaptation to a changing environment; and building free and prosperous societies that can respond well to whatever the natural world throws at them.

But that isn't going to happen while politicians aren't facing up to what has gone wrong, or if they are still unwilling to reconsider disastrous targets from Brussels. I've hardly scratched the surface here, but the scale of the rip-off is astonishing.

There is a high and rising price to pay for neglecting the kind of debate that the other Anglophone countries have been engaging in for years. Failing climate policies are expensive.

Matthew Sinclair is the Director of the Tax Payers' Alliance and author of Let Them Eat Carbon. He tweets at @mjhsinclair.

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