Monday, September 03, 2007

The Case Against Further Green Taxes

The TaxPayers' Alliance has just published the first ever systematic audit of Britain's green taxes (see here). They conclude that Britain is already paying £10bn pa more in such taxes than the estimated cost of our carbon footprint. That's a stonking £400 pa for every household in the land.

I strongly recommend you read the report, but here are some key bullet points:
  • We are already heavily overtaxed- 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, an excess tax burden of £10.2bn.

  • Motorists are already slammed- 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

  • Climate Change Levy whacks poorest- 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. So much for the government's much vaunted- and expensive- regional policies.

  • Air Passenger Duty boosting emissions- the doubling in APD 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.

  • Penal Landfill Tax- it's 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 simply another supplementary charge on stretched household finances.

  • Emissions Trading Scheme Fiasco- the EU's ETS 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.

They also report the results of a YouGov survey which confirms that most of us (63%) think that politicians are mainly using green taxes to raise yet more revenue. Seems we ain't quite as green as we're cabbage looking.

It's well worth a read so you can arm yourself with some facts for the next time some politico tells you he's increasing taxes to save the planet. He's actually doing it so he's got even more to burn.

*Footnote Although they are vital to the case for more green taxes, the social costs of emissions are extremely uncertain. Since the TPA "neither holds nor expresses an opinion on the science behind climate change", it does not attempt to construct its own estimates. Instead it collects and averages the four main estimates produced by others, including the International Panel on Climate Change, Prof Richard Tol, and Prof William Nordhaus, the "father of climate change economics".

As the table above shows, the average of these estimates says we're already overtaxed by £10bn pa. But one estimate says we're undertaxed. That estimate of course, is the one produced by Gordo's placeman Sir Nicholas Stern (subsequently resigned).

We've blogged Sir Nick's appallingly flimsy propaganda scare report several times of course (eg see here and here). Nordhaus and Tol have both ripped into his figures, Tol calling the report “alarmist and incompetent”, systematically "cherry picking" the most pessimistic scenarios and compounding them (see Box 1.3 in TPA report).

So take your pick.

But don't expect Sir Nick to be picking up the Nobel Prize for economics anytime soon.

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