In their response to the recent consultation on the future of carbon pricing in the UK (PDF, pp 38/39), the government noted that there had been 31 responses calling for a carbon fee and dividend.
The Carbon Fee and Dividend approach involves introducing an escalating fee on fossil fuels, which is imposed as close to the extraction point of the fuel as possible. 100% of the funds raised after deduction of administration costs are redistributed to the population. Business competitiveness issues are mitigated by imposing import fees on products entering the country and rebates to exporting businesses. Advocates of the approach highlight that a well-designed scheme would have social and environmental benefits, equitably distributing the revenues and stimulating investment in low carbon technologies.
But then they say
The preferred approach, expressed by the UK Government and Devolved Administrations in the consultation document and supported by scheme participants, is for an effective emissions reduction tool. Placing a price on carbon creates the incentive for emissions to be reduced in a cost effective and technology-neutral way, while mobilising the private sector to invest in emissions reduction technologies and measures. While we recognise the merits of a Carbon Fee and Dividend policy, we do not propose to adopt it at this time.
They don’t say why they do not propose to adopt it at this time, nor do they say at what time they will propose to adopt it.
If you’d like to know, you can write to your MP and ask them to pass on your letter (or email) to energy minister Kwasi Kwarteng at the Department for Business, Energy & Industrial Strategy (BEIS). Ten years ago climate scientist James Hansen argued strongly against cap and trade (the government’s proposed emissions trading system is a form of cap and trade), setting out why fee and dividend is a more effective approach.
Fee-and-dividend is a “transparent, honest approach that benefits the public”, he says, in contrast to cap-and-trade, which “is a hidden tax … because cap-and-trade increases the cost of energy for the public, as utilities and other industries purchase the right to pollute with one hand, adding it to fuel prices, while with the other hand they take back most of the permit revenues from the government. Costs and profits of the trading infrastructure are also added to the public’s energy bill.”
If you get a response from Kwasi Kwarteng or from your MP on this issue, please let us know.