The Case Against Further Green Taxes - Report and Poll

• GOVERNMENT RAISING £10 BILLION MORE FROM GREEN TAXES THAN REQUIRED TO COVER COST OF UK’S CARBON FOOTPRINT
• EVERY UK HOUSEHOLD ALREADY OVER-PAYING GREEN TAXES TO THE TUNE OF MORE THAN £400 A YEAR
• NEW POLL SHOWS BIG MAJORITY BELIEVE POLITICIANS ARE USING GREEN TAXES AS A REVENUE RAISING MEASURE
• FIRST EVER AUDIT OF UK GREEN TAX POLICY REVEALS EXCESSIVE BURDEN OF ENVIRONMENTAL LEVIES THAT FAIL THEIR OBJECTIVES

The TaxPayers’ Alliance has released the first audit of environmental taxation in the UK alongside a new YouGov poll of more than 2,000 adults (double the usual sample) commissioned into public attitudes towards green taxes. 

NEW TPA REPORT – The Case Against Further Green Taxes

Download The Case Against Further Green Taxes (PDF)

The report applies the conclusions of the most prominent experts in the field of climate change research (from the International Panel on Climate Change to academics such as William Nordhaus, “father of climate change economics”, and Sir Nicholas Stern), and compares these studies’ recommendations of the price the UK should be prepared to pay to offset the cost of the UK’s carbon footprint with the actual level of green taxation.  Such a comparison is the only way of knowing whether environmental taxes address root problems or whether they are merely revenue-raising measures.

Covering the main “pollution taxes” of fuel duty; vehicle excise duty (road tax); the Climate Change Levy; Air Passenger Duty; the Landfill Tax and the EU Emissions Trading Scheme, the report investigates each of the green taxes and charges in turn, and reveals that each one has serious flaws:

• Fuel Duty and Vehicle Excise Duty, net of spending on roads, are already between three and forty times higher than the level needed to ensure that drivers cover the official and academic estimates of the social cost of CO2 emissions  This means that each motorist is overpaying by between £548 and £743 each year.
• Under the Climate Change Levy, the North East, England’s poorest region, pays over 35 per cent more as a proportion of regional Gross Value Added, than the South East, England’s richest region outside London.
• The doubling of Air Passenger Duty announced in last year’s Pre-Budget Report is actually likely to have increased total emissions from air travel, incentivising longer flights within the short-haul and long-haul bands.
• The Landfill Tax, which has been increased a number of times by the current government, is already raising up to £620 million more than would be sufficient to meet the social costs of methane emissions from landfill. Planned new bin taxes are likely to represent yet another supplementary charge on stretched household finances.
• The EU’s Emissions Trading Scheme has resulted in a £470 million subsidy from the UK to the majority of EU countries that have not placed strict targets for overall reductions in emissions.

The main conclusions of the report are:

• In many cases, individual green taxes and charges are failing to meet their objectives, are set at a level in excess of that needed to meet the social cost of CO2 emissions, and are causing serious harm to areas of the country and industries least able to cope.
• Taking an average of the most widely quoted official and academic estimates of the social cost of CO2 emissions shows that green taxes in the UK are already well in excess of the level they need to be to meet these social costs.
• The social cost of Britain’s entire output of CO2 was £11.7 billion in 2005 but in the same year, the total net burden of green taxes and charges was £21.9 billion.
• This means that green taxes and charges are already £10.2 billion in excess of the level they need to be to meet the social cost of Britain’s CO2 emissions. This excess is equivalent to over £400 for each household in Britain.
• Green taxes are therefore already too high if they really are a means of internalising environmental externalities rather than simply revenue-raising measures.

NEW YOUGOV POLL – Public distrust politicians on the environment

Most believe politicians are not sincere on green taxes

• When asked what they thought the primary motivation was for new green taxes, 63 per cent agreed with the statement: “Politicians are not serious about the environment and are using the issue as an excuse to raise more revenue from green taxes.”  Only 20 per cent thought that “Politicians are serious about the environment and are bringing in new green taxes to change people’s behaviour to help reduce carbon emissions.” 

Huge number oppose new council recycling charges

• A vast majority (77 per cent) disapprove of local councils placing extra charges for bin collection on top of council tax to encourage recycling, including two thirds (65 per cent) who would “strongly disapprove”.

Fuel Duty and Air Passenger Duty seen as unfair taxes

• 60 per cent think that Fuel Duty is an unfair tax, compared with just 17 per cent who think it is fair.
• 45 per cent believe that Air Passenger Duty is unfair, compared with 23 per cent who think it is fair.

Trebling Air Passenger Duty would not stop people flying

• Concern for the environment will not lead people to change their behaviour unless there are significant tax increases – in the realm that most politicians would be unwilling to advocate.  When asked how much extra air passenger duty would have to cost before they chose not to fly, more than two thirds (71 per cent) would only stop flying if Air Passenger Duty was trebled from its current rate. If politicians only doubled it, 81 per cent of people would still choose to fly.

New green taxes must only ever be used to reduce other taxes

• As a result of this scepticism, there was a very strong view that any new green taxes should not add to the already high tax burden but should be met with reductions in other taxes.  A majority (61 per cent) thought that if extra ‘green’ taxes were raised, “the extra funds should be used to reduce other taxes”. 

Public split on further green taxes

• There is no majority support for moving towards additional green taxes.  When asked whether, “Generally speaking do you approve or disapprove of additional ‘green’ taxes on motoring and air travel?”, 46 per cent disapproved while 45 per cent approved and one in four people “strongly disapproved” against less than one in ten who “strongly approved”.

Most people aware of the high cost they already pay at the pump

• The poll also showed that most people have a fairly accurate assumption about how much tax they pay for driving.  A third thought the proportion of a litre of petrol costing £1 that was made up of tax was less than 60p.  More than a third (38 per cent) thought it was more than 70p. In fact, the cost of Fuel Duty and VAT charged on fuel purchases is equivalent to roughly 65p in the pound – which one in five people (21 per cent) correctly estimated.

Matthew Elliott, Chief Executive of the TaxPayers’ Alliance said: “The public are right to suspect the motives of politicians.  Not only are they split on whether new green taxes are a good idea, but our research proves that politicians have been using green taxes as a revenue-raising measure and are cynically trying to win support for new ones by exploiting concern about climate change.  We need more honesty about the costs of extra green taxes when British taxpayers already pay some of the highest pollution charges in the world.”   

Corin Taylor, Research Director of the TaxPayers' Alliance said: “Green taxes and charges impose substantial costs on, amongst others, Northern manufacturers and the NHS. Green taxes in the UK are already well in excess of the level they need to be to meet the academic estimates of the social costs of carbon emissions.  Every household is paying more than £400 extra in tax every year because green taxes are set too high.  UK taxpayers are already more than doing their bit to pay for the costs of pollution and additional green taxes would be completely unjustified.”

Comments

[Paul D]

I have to say that your report is highly unscientific purely because you have no definition of the 'Social Costs'.

You also ignore the 'physical costs' to the environment, which will have a 'human cost' many hundreds of years into the future, not just in the UK but elsewhere to.

The fact is we are consuming to much and emitting/wasting to much so we have to find ways of cutting this excess.

Unless TPA also put forward guaranteed solutions as an alternative (such as some form of rationing), then being negative about a single issue such as taxes, isn't going to help TPA or the environment. Increased income generally equates to increased consumption in the UK, that increases waste and emissions.

If people in the UK took their environmental responsibility seriously then there would be no need for these taxes, the problem is only a 5th of the country do take it seriously and they are generally angry when they make an effort and the vast majority do not.
The fact is the whole of the UK population has to make an effort, we won't manage that through voluntary individual actions.

Your report also comes out just when emission reduction targets have increased worldwide and will continue to increase worldwide for the forseable future as the world population increases, this is in recognition that what you call 'social costs' will increase as well.

[Matthew Sinclair]

Paul,

I don't think your two criticisms of our study stand up.

Our social cost estimates are taken from major studies by the IPCC and senior academic experts in the field. The concept and its function in setting an optimum carbon tax is well established. Little purpose would be served by us creating a new definition of the term.

Social cost estimates take account of harms now and in the future so your charge that we ignore future physical costs is also incorrect.

[bruno]

You have failed Bastiat's test, looking only at what the eye sees and ignoring what the eye does not see. What about those areas where no carbon-pricing is applied, despite the presence of carbon externalities? I am thinking of heat-production, which, despite being one-third of our primary energy consumption, seems not to be mentioned at all in your report. And particularly domestic heat, which not only has no carbon-pricing applied, but receives a special low rate of VAT. This is in effect negative carbon-pricing of green heat (or of the carbon-benefit of insulation etc). You are right about some carbon prices being too high, but it's not all one way traffic. What we need above all is harmonization, so that a tonne of carbon costs the same whether it is emitted from a coal-fired power station, a car's exhaust or from the gas boiler in your house.

[Paul D]

How can you possibly assume that:

"If a green tax is set at the true social cost then the socially optimum amount of carbon will be emitted"

That just doesn't make a lot of sense. There is no direct connection between someones behaviour as a result of being taxed a specific amount and the actual emissions produced by that person.

There is a behavioural connection but no direct mathematical and economic one. People in the UK are so used to a certain life style now that many would willingly divert resources to pay a socially optimum green tax whilst still producing just as much if not more in emissions.

This is clearly already happening since you claim taxes are to high and emissions are going up instead of coming down. If Taxes came down, then people would have more money to spend on consumer goods and holidays, thus increasing emissions.
In any case a vast amount of wealth in the UK is dependent on the cheap supply of fossil fuels!
A green tax at least attempts to address that fossil fuel subsidy that drives the economy.

As i said in my first post, unless you have real solutions, then criticising the taxes on this issue will lead most people to think that you don't consider the environment to be a problem.

The only other realistic solution i know of is called rationing! (of one sort of another).

[julie lowe]

Hi Corin,
Can we talk about this? We are totally on your side. We believe that all people should pay Treetax but that is it ! £10 for indivs and a differing cost for business. We believe that the government 'taxes' is money raising by stealth and no accountability. We are putting that on our web site. ( Currently down for the addition of e-shop)
J

[charlotte swain]

HI
Our expression is Sustainable Footprint (TM) which encompasses more than carbon. We think that a positive action response is more acceptable and realistic than 'hidden taxes'

[bruno]

There is a conceptual point underlying Paul D's argument, though I do not share his view that the merits of any particular carbon-price can be judged by whether they deliver outcomes that have been pre-judged to be desirable.

Let's take the hackneyed example of a factory discharging pollutants into a river. A Pigovian tax could be levied at a rate proportionate to the harm caused downstream, and most would regard the externality to have been internalized. But what if the revenues from that tax are recycled via tax-break or subsidy to the factory-owner? In that case, the Pigovian tax would be entirely ineffective at internalizing the externality. The same would apply if the tax were recycled to the factory's customers. And it would be only partially effective (or put another way, under-priced) if some of the revenue were recycled to the owner or customers. To be able to claim that you have internalized an externality by applying a Pigovian tax at the level of the social cost of the externality, it is necessary for the revenue from that tax to be used to compensate proportionately those who suffer the impact of the externality.

In the case of the UK's carbon mechanisms, we are all effectively shareholders in the factory, and whilst we all live downstream, there are others downstream who have a lesser share of the factory and suffer a larger share of the impact. I am talking about those, in developing countries or elsewhere, who are more exposed to the effects of climate change. And yet the revenues from all our carbon-pricing mechanisms are recycled to us as majority shareholders in the factory (with the exception of EU-ETS, which serves to transfer funds to owners of even dirtier factories who cheated the system). I do not think, under these conditions, that we can say we would have fully internalized the social-cost of carbon, even in the unlikely event that taking an unweighted average of the estimated costs from a few studies produced an accurate price, by applying that price as a Pigovian tax or by any other means where the revenues are mostly retained within the UK.

I have set out this argument in greater detail over at Picking Losers (http://www.pickinglosers.com/blog_entry/bruno/20070819/planes_trains_and_automobiles). I support carbon-tax as the best mechanism to internalize carbon-externalities, but the imprecision and uncertainty in the calculations of the social cost of carbon, and the retention within national boundaries of revenues from the taxes are weaknesses which require more sophisticated institutional arrangements to tackle.

[bruno]

Let's try that again (the auto-generated link is borked):

http://www.pickinglosers.com/blog_entry/bruno/20070819/planes_trains_and_automobiles

[bruno]

By the way, on the merits of the calculations of the social-cost of carbon by Stern and Nordhaus, see:

http://www.pickinglosers.com/blog_entry/bruno/20070903/pricing_future

They appear each to have shot the other's fox, which leaves us with...

[Andy L]

Paul D says:
"I have to say that your report is highly [b]unscientific[/b] purely because you have no definition of the 'Social Costs'.2

that's rich but then then he says:

"As i said in my first post, unless you have real solutions, then criticising the taxes on this issue will lead most people to think that you don't consider the environment to be a problem."

Not wanting to raise a debate on global warming here, but I feel I have no choice since there has been the assumption made that CO2 causes global warming is a scientifically proven fact - it is not and I defy anyone who says it is. Yet here we have the typical green contradiction where they insist on scientific accuracy when it come to arguments against their perceived GW viewpoint and quite happy to take at face value the weak scientific (but strong only politically) arguments to support man-made CO2 causes global warming.

These taxes are never ever going to solve the man-made global warming problem because there is no such problem in the first instance. And second Paul D likes to mention 'solutions' even though there is not a known problem, yet I cannot see how taxing an already overtaxed population will solve this (non)problem - it assumes that the tax will be spent on what the government promises to spend it on and we all know that does not happen, at least not for long, before they use the taxes for something else.

[jake bowers]

Economics 101?

How about Taxes 101.
http://whatistaxed.com/diagram.htm

[Acorn]

Remember the "Boiled Frog Syndrome"; put a frog in a kettle of water, switch it on, the frog dies because he never realises he needs to jump out, the water is slowly getting hotter but he fails to catch on. The same goes for tax, they slowly get bigger and bigger. I do not know of any business that can truly cost its "regulation" burden never mind trying to measure "social cost" - that would satisfy an Auditor. You are talking about a difference of about £10b of green taxes, it is a bit like having a pissing contest at the top of a mountain. Don't lets forget how high the mountain is, about £540b, about 44% of GDP at factor cost.

[Alex]

I disagree entirely with this whole carbon tax rubbish.

The ice caps have melted before, indeed the flood which separated the UK from continental Europe was likely caused by such a melting event.

Only back then there wasn't a car or factory in sight.

Climate change is natural, we live on this earth, we in no way command what it does and when it does it.

[Anne Palmer]

Carbon Footprints.

If you worry about the environment
Look up at the sun in the sky,
Politicians would have you think of CO2’s
Environmentally, I don’t know why.
Perhaps we take for granted
The sun that shines each day,
Even though at times it hides
Behind those clouds of grey.

But what if the sun burnt itself out?
What would warm us up then?
What if it exploded? Blew itself up?
Turned the day into night again?
Just suppose it fell right down
Out of sight of our earth one day?
To warm up another planet
What would politicians then say?

As the earth started to freeze right over,
In a permanent kind of way,
No more ‘hundred year’ cycles
We knew of, in ‘global warming’ days.
What happened to environmental tax
We paid to save our world?
Where is the “global warming” now?
As my story starts to unfold?

There is no doubt we need to recycle
In this easy come and go world we live,
We take resources out of the ground
But nothing in its place we give.
But to be spied upon, bugs in bins?
Be watched and tagged is no fun,
Make a mistake, an on the spot fine?
Its what a dictator would have done?

I have read the CO2 calculator,
Worked out what is expected of us,
The importance of greenhouse gases
Of dry-ice, and the need to fuss.
But without our sun, moon and stars
The earth will surely die,
These tales of carbon emissions
Surely it wasn’t ALL a lie?

[Anne Palmer]

Carbon Footprints.

If you worry about the environment
Look up at the sun in the sky,
Politicians would have you think of CO2’s
Environmentally, I don’t know why.
Perhaps we take for granted
The sun that shines each day,
Even though at times it hides
Behind those clouds of grey.

But what if the sun burnt itself out?
What would warm us up then?
What if it exploded? Blew itself up?
Turned the day into night again?
Just suppose it fell right down
Out of sight of our earth one day?
To warm up another planet
What would politicians then say?

As the earth started to freeze right over,
In a permanent kind of way,
No more ‘hundred year’ cycles
We knew of, in ‘global warming’ days.
What happened to environmental tax
We paid to save our world?
Where is the “global warming” now?
As my story starts to unfold?

There is no doubt we need to recycle
In this easy come and go world we live,
We take resources out of the ground
But nothing in its place we give.
But to be spied upon, bugs in bins?
Be watched and tagged is no fun,
Make a mistake, an on the spot fine?
Its what a dictator would have done?

I have read the CO2 calculator,
Worked out what is expected of us,
The importance of greenhouse gases
Of dry-ice, and the need to fuss.
But without our sun, moon and stars
The earth will surely die,
These tales of carbon emissions
Surely it wasn’t ALL a lie?

[Alex T]

Let's take a look at the facts about global warming...
1) IT'S FOOLISH TO BLAME CO2:
Animals and people breathe out CO2 all the time. There will always be some leakage of CO2 into the atmosphere, as plant life only absorbs as much as needed for respiration. If CO2 is the cause of global warning, it's clear that there's nothing we can do about its presence.
2) IPCC REPORTS ARE EDITED A LOT:
It seems the IPCC only want us to see what their edits tell us. According to analysts, IPCC reports are often inaccurate because key facts have been omitted or altered. See also:
http://www.realclimate.org/index.php/archives/2007/02/the-ipcc-fourth-assessment-summary-for-policy-makers/
3) SOME SCIENTISTS DON'T BELIEVE CO2 CAUSES GLOBAL WARMING:
Here is the opinion of an Australian professor:
http://www.smh.com.au/news/environment/climate-change-not-caused-by-humans-academic/2007/04/04/1175366308635.html

Continued...

[Alex T]

...Continuation

Facts about global warning
4) IT'S ALL ABOUT MONEY:
Since John Major invented the "duty accelerator", Gordon Brown has been quick to inherit (I mean, steal) the idea. Brown is also planning expansion of our roads and airports. Obviously, this is to increase traffic flow, causing greater revenue from tax. Building superhospitals and superschools has the same effect as it forces people to travel further to reach "local" services. The amber and red light combination on UK traffic lights, that only serves to encourage revving, is yet another tax weapon.
5) TAXES ON CO2 DON'T WORK:
Too many Britons have bought into the idea that higher taxes means better public services. This isn't necessarily true. There are certain core taxes that only serve to make other things more expensive. I will use petrol tax as an example. Mainly, it is council tax that pays for public services. Petrol tax isn't paid to councils so it doesn't play a part in improving anything. However, councils use petrol vehicles to go about their daily business. So higher petrol tax means higher council tax. Also, essentials like food and emergency services are much more difficult to afford. At the end of the day, all core taxes are simply recycled into Whitehall.

CONCLUSION:
The people of Britain need to rise up against the Government and resist the excess green taxes. We need tough action and we need it NOW. For the TPA, that means taking a more active role in society. I believe the current "occasional line in a newspaper" appearances are simply not enough! Has the TPA ever considered acquiring political party status? I would vote for you any day; you're just what our country needs!

Alex