Help the poor, the elderly, manufacturing industries and commuters; reform climate change policy

Today the TaxPayers' Alliance is releasing a new report (PDF) on green taxes and regulations, Ending the Green Rip-Off: Reforming climate change policy to reduce the burden on families.  The report sets out the huge and excessive burden that green taxes impose on families and business across the UK, it also provides local estimates which show how different areas are affected.

When the TPA has released reports on this subject before we've had a great debate on Centre Right.  You can find the different posts about the last edition, released in August 2008, by working backwards from this post.  It showed the potential of the blogosphere to enable a real "back and forth" debate instead of just a report and then a response with no follow up, which is often all that is possible in the mainstream media.

The key message that Conservatives should take from this report, particularly Greg Clark MP who wrote for the Platform yesterday, is that there is a huge opportunity waiting if they reform climate policy.  Of course, it is easy to read too much into what the polls are saying right now, but it does look like they will have to work hard to avoid a hung parliament.  If they win in the Spring, then the Conservatives will be looking to win a second term after imposing considerable fiscal restraint.  They need something to sweeten that bitter pill, a way of giving voters a significant material reason to vote for them despite having no money to spend.

The big opportunity to do that is in climate change policy.  The current approach is clearly failing, there are a number of critical problems:

• It places an excessive price on emissions.  If even an excessive price can't achieve results, that means there aren't economical alternatives to fossil fuels.  Our new report shows that green taxes are currently excessive to the tune of £21.8 billion.
• Increasing the price of energy for households hits the poor and elderly hardest.  That means other important goals like fighting poverty and benefit dependency are compromised.  14 per cent of domestic bills are already the result of climate change policies.
• Increasing the price of energy for industrial consumers costs jobs.  If we want to make our economy less dependent on financial services, driving up a major cost to manufacturing firms isn't the way to do it.  Sending factories abroad also doesn't do anything to cut emissions.  21 per cent of industrial electricity bills are already the result of climate change policies.
• It isn't achieving the desired cuts in emissions.  It is hard to establish this empirically, as we don't know what level emissions would be at without current policies, but looking at the data since 1970 I don't think many people would think that a major, and escalating, attempt to cut emissions had been made from the early 1990s.

 

It isn't only the TPA who has spotted that the current approach isn't working.  Research (PDF) for the Mackinder Programme for the Study of Long Wave Events at the London School of Economics and the Institute for Science, Innovation and Society at Oxford University by senior academics in the field argues that existing policy has been an "abject failure".

The cost is set to rise massively under a Conservative government.  Citigroup research (not available online unfortunately) argues that it is possible there will be a 57 per cent to 100 per cent increase in prices by 2020.  That is a result of the need to finance massive investment to meet renewable energy targets, in particular.  This table shows estimated capital expenditure needed in the energy sector, and the disproportionate burden that Britain is facing (bear in mind we have made just about the best progress towards meeting our Kyoto targets) thanks to the Government's disgraceful failure to stand up for Britain's interests:

Combining that with a major fiscal tightening will mean an absolutely intolerable burden on ordinary families.  The poor and elderly will suffer particularly badly, but even those on average incomes aren't going to be able to afford anything like a doubling of already high energy costs.  At the same time, and in order to pay for that massive investment, energy companies will see their profits rise substantially.  That is a recipe for a huge political blow-up.

But, reforms to climate change policy could win over vital constituencies like the elderly and suburban commuters.  We've set out what such a programme could look like, there is more detail on each of the measures in the report:

• Leave the EU Emissions Trading Scheme and replace the Renewables Obligation with a technology-neutral Low Carbon Obligation, which would allow lower cost, low carbon sources not classed as “renewable” to be used. This is likely to cut electricity bills by 10 per cent or more from their likely level under current policies by the end of the next Parliament, and as much as 50 per cent by 2030. The corollary of this is that the existing 2020 targets should be abandoned as unhelpful and counterproductive.
• Invest in technological development using money saved by cutting existing and ineffective climate change spending. This will help reduce emissions not just in Britain but also globally.
• Focus transport policy on delivering maximum capacity with scarce resources by focussing investment on the road network and commuter rail, which move the most passengers.

Politicians need to understand that, however much they might be willing to sacrifice to cut emissions, the public aren't going to support that.  So far that has largely been ignored and policy dictated by the environmentalist fringe.  Such a strategy isn't going to be sustainable as the cost of climate policy continues to rise.  Particularly with public scepticism over the science growing after the ClimateGate scandal.

I do understand that the strategy we've recommended would upset some significant vested interests and others earnestly but wrongly committed to the present direction of policy.  But, it is going to become a political imperative to stop just adding new layers, with new burdens for taxpayers, to the existing melange of climate change policy and start working at reducing the cost through serious reforms.

There is a huge opportunity for either party to become the party of low energy prices.  The Conservatives should seize it.