Wednesday, March 05, 2008

UK treasury pressured to take its own advice.

The UK Budget is on it's way and a group of MPs from both parties have called for the govornment to take its own advice. In perticular the Stern Review that has gone on to become internationally significant had a series of recomendations very few of whitch have been implemented.

"The committee of 16 MPs said green taxes, as a proportion of all taxes, has
declined from its peak of 9.7% in 1999 to 7.6% in 2006."

Punches have not been pulled by this group--the Environmental Audit Committee.


"We've had enough of half measures and green spin. The chancellor must put
climate change at the heart of next week's Budget and make it cheaper and easier
for people to go green."

The 40 page report (The 2007 Pre–Budget Report and Comprehensive Spending Review: An
environmental analysis
) can be downloaded here (PDF). One of the starkest contrasts between congressional committees in the US and there counterparts in the UK is that somehow we manage to produce some great reports and often with cross party consensus. I`m not overly anamoured with the UK political system but our committees do some exceptional work.

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At 12:52 PM, Blogger Calvin Jones said...

Green taxes

A decade ago the Treasury made a number of bold announcements on environmental taxes. But in 1999 the fuel duty escalator was abolished, and in subsequent years other green taxes were frozen. The net result was that environmental taxes as a proportion of all taxation peaked at 9.7% in 1999 and have declined ever since, falling to 7.3% in 2006.

While Budget 2007 signalled a slight renewing of ambition with a range of increases to green taxes, these changes were modest, and in many cases leave respective rates lower in real terms than they were several years ago.

Aviation

The Committee welcomes the reform of Air Passenger Duty into a levy per flight rather than per passenger, as the Committee has recommended in its last two reports on green taxation. However, it is vital that tax on aviation is not just reformed but significantly increased, so as to stabilise demand and resulting emissions. The Treasury should closely examine the merits and practicalities of varying rates by classifying journeys into three
bands, ‘short-haul’, ‘long-haul’, and ‘very long-haul’, in order to reflect better the differing magnitude of emissions arising from the longest range of intercontinental journeys.

Motoring

Road transport emissions in england went up by 12% between 1997and 2006; and the 2006 UK Climate Change Programme Review forecast that increased road transport
emissions due to traffic growth over the period 1990–2010 would more than outweigh the entire suite of carbon reduction policies aimed at the transport sector. Some motoring organisations have begun calling for the next planned increase in fuel duty to be scrapped, given the rise in petrol prices due to increases in the price of crude oil. The forthcoming
Budget is a test of the Treasury’s environmental credibility: it must not defer its planned rises in fuel duty.

Carbon Capture and Storage

If the Government were only going to fund one Carbon Capture and Storage (CCS) demonstration project, it was right to restrict it to a post-combustion coal plant, as this technology could be retrofitted to existing power stations, for instance in China and India. But overall the Government has not shown enough urgency in its approach to CCS, and it is absolutely imperative that the Treasury provide considerably more assistance for the development of this technology in the UK. In order for CCS to be deployed widely and swiftly in the UK, we recommend that the Government introduce some form of financial mechanism for incentivising CCS power plants over conventional power stations.

Shadow Price of Carbon

There appear to be serious flaws in the thinking behind the Shadow Price of Carbon (SPC). The Government has assumed that international action will be taken to ensure that the effects of climate change will be relatively mild, and has therefore set the SPC at a relatively low level. There is a high probability that, by setting a relatively low carbon price, this will fail to discourage the approval of carbon-intensive policies and projects, and thus actually make it harder to achieve the global targets that the Government is assuming will be met.

The 2007 Pre-Budget Report and Comprehensive Spending Review: An environmental analysis To redress this, the Shadow Price of Carbon should be increased, by basing it on the projected costs of following a ‘business as usual’ trajectory of emissions. The Government’s first priority should in any case be deciding how potential projects affect UK carbon
budgets. Only after that should the cost-effectiveness of different policy options be taken
into account.

Environmental Transformation Fund
The Pre-Budget Report (PBR) announced funding for a new Environmental Transformation Fund: over three years, £370m will be spent on low carbon technology in
the UK, with £800m being spent on forestry protection and low carbon investments in the developing world. Of the domestic fund, only £170m is new money, and the overall
funding is being spread very thin; the urgency of the need to cut emissions means that this should now be a much higher spending priority. The international fund, meanwhile, was probably the most impressive announcement in the PBR. However, the Government
should establish rigorous sustainability criteria to cover all investments from this fund, in
particular to avoid it being used to fund unsustainable biofuels plantations.

Emissions trading

Some of the emissions savings reported by the Government incorporate the net purchase
by the UK of millions of carbon allowances, although the Government does not always
make this clear. The Government should always be transparent about where reported emissions figures incorporate the purchase of carbon credits, otherwise it might give a
falsely reassuring picture of progress in decarbonising the UK itself. The Government should also do more to verify that the purchase of carbon credits by the UK is funding genuine emissions reductions elsewhere in the world.

Public Service Agreements

The new Public Service Agreement (PSA) on climate change is too diffuse, with no clear departmental targets for reducing emissions, and reduced emphasis overall on reducing emissions from the UK (this is only one of six performance indicators). The Government should consider setting emissions reduction targets for specific sectors of the economy,
with relevant departments being made accountable for achieving them. Overall,environmental issues appear to be ‘ghettoised’; the Treasury must do more to mainstream
environmental policy by reflecting it more strongly throughout the entire range of PSAs.

Conclusion

Although the Pre-Budget Report and Comprehensive Spending Review were published a year after the Stern Review, there was little sign in them that the Treasury was responding on the scale and with the urgency Stern recommended. Furthermore, since the Stern
Review was published the science on climate change has continued to harden, with global emissions rising faster than projected; thus the Treasury’s lack of urgency stands out as even more remiss. Pre-Budget Report 2008 must establish a coherent set of measures to help deliver the UK’s 2020 domestic and EU targets on emissions and renewable energy,
and show explicitly what their planned contribution to this delivery will be.

 

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