Think tank suggests taxing polluters to fund renewables
Tuesday 27 October 2009
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| Funds from additional taxes on polluters could be invested in renewable energy generation |
Investment in renewable electricity generation should be funded by taxes on activities that pollute and degrade the environment, a financial think tank suggested yesterday (October 26).
The Green Fiscal Commission (GFC), which was established to explore the economic, social and environmental implications of a major green tax shift for the UK, made the comment in a report drawing on three years of research.
The study models options for a green tax system in the future, calling for a "green fiscal reform" whereby taxes are reduced on the activities valued by society, such as jobs, incomes and profits, and the lost revenue is replaced by taxes on "societal ills" like pollution and environmental degradation.
In one of its scenarios, 10% of the environmental tax revenues are invested in making homes more energy efficient, in fuel-efficient cars and in offshore wind electricity. This resulted in an increase in the generation of electricity from renewables to 26-29% by 2020.
The report's authors said that investing a small proportion of the revenues from green fiscal reform in renewable energy development and energy-efficient homes and vehicles, would accelerate the growth of new low-carbon industries with "real export potential", as well as increasing the environmental benefits of green fiscal reform.
Robert Napier, Green Fiscal Commission chair, said that the report added quantitative data to an issue that is more frequently discussed in general terms.
"It shows that green fiscal reform could help put the UK on a low-carbon track and from that many positives will flow: reduced greenhouse gas emissions, extra employment, and new technologies which will help the UK economy all round," he said.
Report
The GFC said that if the UK was to meet its climate change and other environmental targets it would need to apply a wider range of policy measures, and apply them more stringently.
The report suggested that a ‘polluter pays' tax shift could provide a significant boost for UK low-carbon jobs and competitiveness, as well as reducing UK emissions by over 30% by 2020 and creating 455,000 new jobs.
There would no increase in the overall tax burden, the report said, but highly polluting households and businesses will see their tax bill increase where low pollution households and businesses will see their tax bill cut.
The report's authors claimed that most of the emissions reductions by 2020 would have to come from the large-scale deployment of new renewables technologies, energy efficiency in households, transport, business, power generation and the public sector, and a reduction in consumer demand for energy services.
They concluded that an increase in energy prices is the only economic change that will directly promote all three of these outcomes.
"Changing the price of polluting activities relative to clean ones is a vital element in any serious package of measures intended to reduce climate change emissions. Green Fiscal Reform is the best way for a national economy to achieve this shift in prices," the report's authors said.
They added that its results suggested that a large-scale green tax shift would be economically sensible and environmentally effective - and that polling showed public support.
"If implemented with appropriate complementary measures, it could also be socially acceptable, especially as increasing numbers of people come to realise the imperative of reducing carbon emissions and climate change," the authors said.
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