The answer is, of course, Climate Income. I’ve been doing some back of envelope calculations to see exactly how CCL’s core policy would impact the current cost of living crisis. The mathematical details are given in a document you can find here and you can find the actual calculations here but let me give you the gist.

My starting point was to work out what household income level you need to avoid fuel poverty. A widely used criterion is that fuel poverty starts when household fuel bills exceed 10% of household income. All our bills have gone up massively in recent months and a typical annual bill is now around £2000. So, fuel poverty starts if your household income is less than about £20k per year and that means 27% of all families. Over seven million households in fuel poverty is shocking!

So how much would Climate Income help? Working this out involves looking at how adding extra costs (in the form of the carbon price) and extra income (in the form of a dividend) changes the income level at which households suffer from fuel poverty. The results, and how they depend upon the carbon price, are shown below.

The fall in this threshold, as the carbon price increases, takes some families out of fuel poverty but how many? This is shown in the next graph.

At a reasonable carbon price of £100/tonne, the graph shows that a Climate Income policy would remove over 300 000 families from fuel poverty and that’s about a million people. However, it must be admitted that this is a small fraction of the 7.5 million households in fuel poverty. I certainly wish it was higher but we shouldn’t pretend that our pet policy achieves more than it does. This is still a good result and much better than the current, treasury policy of simply subsidising fuel bills by giving (most) households a flat refund.

We can demonstrate that by costing a subsidy policy that achieves the same result, i.e. that gives households the same financial benefit as that shown in my first graph. This is shown below.

The conclusion is clear. At a sensible carbon price of £100/tonne of CO2, Climate Income achieves the same level of fuel-poverty reduction as a £13 billion subsidy, every year, from the treasury. And it would provide our government with a convincing, world-leading policy for tackling climate change they could present at COP27 in November. It’s a no brainer! Isn’t it?