It’s the climate policy that dares not speak its name – a catchall carbon tax. Yet if ministers are serious about reaching their net zero target by 2050, it may become unavoidable. Naturally, the Government is very reluctant to admit as much. Even to concede the possibility of taxing carbon, so as to incentivise firms and consumers to adopt greener alternatives to fossil fuels, is deemed electoral suicide by some in the Tory hierarchy. It also further cuts across deep-rooted low-tax ambitions. Rather, No 10’s preferred solution is a combination of regulation, such as banning the sale of all new petrol and diesel cars from 2030, and its emissions trading scheme (ETS), a market-based mechanism that has the effect of putting a price on carbon, but is not a tax as such. Like regulatory measures, the ETS cynically foists liability for meeting the Government’s promises onto the private sector, allowing ministers to shirk direct responsibility. Whether it is sufficient to drive the desired energy transition within the timescale promised, however, looks increasingly open to question. Even on regulation, the Prime Minister seems to be getting cold feet, with the Government reportedly rowing back on plans to make the installation of new gas-fired boilers illegal from 2035; the goal is instead to ensure that households “do not face significant costs”. What is more, if the ETS is to work effectively, its coverage will have to be expanded, to domestic heating, motoring, agriculture and much else. It will feel like a tax, in the sense that it adds to prices and reduces disposable income correspondingly, even if it is technically not one.
Telegraph 12th Aug 2021 read more »