The Canadian Conservatives won an election fighting against a carbon tax. The Financial Times reports that the British Conservatives are going to go into this election promoting one. Essentially, the tax would function as a floor on the price under the European Union Emissions Trading Scheme (ETS), making up the difference when the market price fell below a certain level.
The amount it would add to bills is highly contentious. Mostly because it depends on the kind of market carbon price we expect in the future, and how much and how often it is below the new floor. But the FT article reports that EDF Energy believe a floor in the range of €25-35 a tonne is necessary (confirming the figure in a Times report last year which EDF Energy appear to have attacked unfairly). The current price is around €13 so you could easily be looking at doubling the contribution of the ETS to energy bills.
I once spoke at length to some of the lobbyists pushing for this new carbon tax. What they are after is a stable incentive to invest in things like nuclear energy and carbon capture and storage which are more affordable ways of cutting emissions than building windmills. After a long discussion, they didn't contest my point that there are basically two ways of changing policy to get the result they want.
You can either follow the kind of approach I outlined in our Ending the Green Rip-Off report at the end of last year. Stop discriminating between different low carbon sources of energy in the Renewables Obligation, make it a Low Carbon Obligation or something like that, and drop the 2020 targets so that we don't rush the wrong technologies into place just to meet an artificial deadline.
Or you can impose yet another burden on energy consumers, in addition to all the others, with a new carbon tax. The first route, the one we've proposed at the TPA, will upset those with an ideological commitment to the rapid installation of huge amounts of wind power, the latter route will mean even higher bills for consumers than present policy is set to deliver.
Because this new tax will be on top of the huge addition to people's bills that is set to come from requiring energy companies to invest in hugely expensive offshore wind power and other renewable energy capacity. Citigroup Investment Research think meeting environmental targets like that could double energy bills. And there is also the cost of the feed-in tariffs scam (even George Monbiot can see that scheme is a huge rip-off), where the Conservatives are also pledging to be more ambitious than the Government.
Whatever you think about the science of climate change, Conservatives who are serious about dealing with the deficit need to understand how important this issue is to that agenda. That means all the parliamentary candidates who ranked getting the public finances under control at the top of their list of priorities and cutting emissions bottom in ConservativeHome's survey. And the team at the Treasury who won't be able to ignore what their DECC colleagues are up to. Because it would be political madness to push through a massive rise in energy bills and the big fiscal adjustment that is needed to get the public finances under control at the same time, it would just be too much pressure on family budgets. I look at this issue in more detail in the new book How to Cut Public Spending (and Still Win an Election).
Another issue, for those worried about poverty and benefit dependency, is that the policy would also hit low and middle income families hardest, this graph is from our Ending the Green Rip-Off report:
