Matthew Sinclair’s criticism of carbon taxation – that at a time of economic difficulty adding to the tax burden of our biggest employers is the last thing we should do – has a certain logic to it. It’s certainly true that the carbon floor price, effectively a tax, will add costs to those industries which use a lot of energy. But I feel he has the wrong target. Our focus should be on the absurdly bad value for money policies, not the ones that actually make sense.
A year back while still working at Policy Exchange, I wrote the first half of a report, the second half of which, by Prof Dieter Helm, laid out the design of a carbon floor price. Guilty as charged, I was a bystander in the call for a carbon tax. But not any old carbon tax. The political argument made in the report was that those who take the risks of climate change seriously ought to take the costs of tackling it seriously too. For too long the politics of climate change have been hippies versus accountants; one side carefree about costs if their preferred solutions made them feel good, the other missing the big picture by counting pennies. But those who are concerned about climate change have a responsibility to take the costs of tackling it seriously too.
Which brings in the first half of that report. It looked at the costs of various climate change policies, which range from the low (about £3/tonne) to the absurd (about £460 for the Feed-in Tariff for microrenewables, i.e. a subsidy for mini-solar panels and others). I’m proud to lay claim to pointing out just how bad value for money the Feed-in Tariff scheme inherited from the previous government was, which the Coalition have rightly reined in. The alarming thing was that the figure for the cost per tonne came from DECC’s own analysis – meaning that the Labour government knew how bad value it was, and happily signed it off anyway.