Yesterday’s UK Budget wasn’t bad for climate protection, although it wasn’t nearly as good as it should have been. Announcements on energy and the promised Green Investment Bank were quite good, but those on transport were awful.
The best piece of news was the commitment to fund four demonstration projects in carbon capture and storage (CCS) and to raise the money for this by general taxation, not a levy on electricity and gas use. The UK has an widespread and growing problem of fuel poverty – households who have to spend at least 10% of their disposable income on fuel – and a CCS levy, on top of the Renewables Obligation and Feed-in Tariffs, would have put even more people into such poverty. CCS is an essential bridge technology until we can be 100% reliant on renewables and the UK is well placed to develop it as the carbon dioxide can be stored under the sea, so removing public opposition.
Also good was the announcement that the Green Investment Bank will have £3 billion to lend and will begin operation next year. From 2015, it will have also have borrowing powers, making it a bank rather than just a fund.
The announcement that there will be a carbon floor price also sounded good. From 2013, electricity will have to pay £16 for every tonne of carbon dioxide they emit, moving to £30 by 2020. A floor price is a good idea because it means that power companies have more regulatory certainty than they do under the existing cap-and-trade system, the EU Emissions Trading Scheme (ETS). However, the proposed rates are too low. £16 is equal to €18, not much above the current €16 per tonne under the ETS. £30 is equivalent to €34, so is an improvement but not nearly enough to get the low-carbon power stations we need. So this can be counted only as half a step forward.
Cutting duty on petrol and abolishing the ‘fuel duty escalator’ (which increased fuel duty slightly more than inflation every year) sounded bad for the climate. However, global oil prices are very high, so the actual price at the pumps is also high. Furthermore, the UK government has increased petrol prices by more than this reduction by increasing VAT. This has been pointed out by the Labour Party, which has been campaigning for cheaper petrol, despite its claims to take climate change seriously (which its leader Ed Miliband certainly does) and the fact that, in government, it introduced the fuel duty escalator. What matters to the consumer is the price at the pump, not the amount made up of tax compared to the amount due as a result of the price of oil. The abolition of the fuel duty escalator is bad news as this helped consumers and car companies focus on more efficient vehicles. However, the global oil price is not likely to come down significantly any time soon. So this was only half a step back.
However, a full step back was the Chancellor’s announcement that a planned increase in Air Passenger Duty will be delayed at least a year. This was welcomed by the right-of-centre Daily Telegraph newspaper:
“Mr Osborne’s comments will provide temporary respite for holidaymakers – saving a family of four more than £45 on a long-haul holiday – but further increases remain on the horizon.”
The Telegraph is running a campaign for “a fair tax on flying”, on the grounds that people flying from the UK pay more tax than those flying from other parts of Europe. This is true, but irrelevant. Flying is not one of life’s necessities, unlike heating. People who take flights are not poor and there is no technological solution to flying. A fair tax on flying – one designed to help the poorest people in the world from drought, floods and diseases – would be much higher than the current UK one.