A green ‘stealth’ tax to encourage new wind farms and nuclear power plants could push tens of thousands of households into fuel poverty but do nothing to reduce emissions.
The carbon floor price, announced in the March Budget, could even end up giving climate policies a ‘bad name’, the Institute for Public Policy Research (IPPR) has warned.
To be introduced in 2013, the tax is intended to encourage investment in low-carbon energy – and raise billions for the Treasury.
Under the existing rules, energy companies must generate a fixed amount of green energy every year, or else buy permits to pollute on the open market.
The new tax kicks in if the cost of these permits falls too low. From 2013, the ‘floor price’ of a permit needed to emit a tonne of carbon will be set at £16, rising to £30 by 2020.
The higher cost of electricity will be passed on to household and business customers with energy-guzzling industries hit hardest.
But the IPPR, a centre-left think-tank, says that householders, many of whom are already struggling to pay their fuel bills, will also suffer. It estimates that 30,000 to 60,000 more households will be pushed into fuel poverty – defined as spending more than 10 per cent of your disposable income on heat and light.
The think-tank also warned that the UK scheme could lead to lower carbon permit prices elsewhere in Europe – and so do nothing to ease pollution.
Andrew Pendleton, IPPR associate director, said: ‘The carbon price support scheme risks giving energy and climate change policy a bad name because it will do nothing to reduce carbon emissions while piling more cost on to the shoulders of already hard-pressed consumers in the UK.’
The think-tank report also said that because the floor price was announced in the Budget, it would be open to annual review – meaning it would not have the certainty needed by investors looking at putting money into low-carbon energy projects such as wind, wave and nuclear power.
The report suggests setting the floor price low to minimise its impact and urges ministers to encourage European countries to introduce similar measures.
Confining the tax to Britain could be an ‘inexcusable’ waste of £1billion,’ Mr Pendleton said.
The soaring cost of fuel means that 5.5million households are already living in fuel poverty —including two million pensioner households. This is compared to 1.4million households in 2004.
Earlier this month CBI director-general John Cridland said a trio of new carbon levies, including the carbon floor price, were ‘counterproductive’ and will make the UK’s steel and chemicals industries less competitive on the world stage.
In a stinging attack, the head of Britain’s largest business lobby called for the Government to axe some climate change taxes and make energy-intensive businesses exempt from others.
The warning came days after former Cabinet Secretary Lord Turnbull said politicians should ‘stop frightening us and our children’ about global warming.
He accused politicians and Whitehall mandarins of pandering to global warming ‘alarmists’ and consigning Britain to a future of inflated fuel bills.
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