At the November CCL UK national meeting we had an informative talk by Molly Scott Cato, the Green Party’s Finance and Economic spokesperson. Molly explained the background to the Green Party’s carbon pricing policy, which currently comes closest to the Climate Income policy advocated by Citizens’ Climate Lobby UK.*
Molly explained that the EU would have liked to have implemented a carbon tax in 1992 but the requirement for unanimous approval of policies made that aim impossible, so the in 2005 EU copied the UK Emissions Trading System (2002), creating a market in carbon allowances rather than more predictable pricing. ETS should create an incentive for businesses to avoid payments by decarbonising but it lacks the gradual, predictable rise in prices which businesses require to plan effectively and carbon intensive industries were permitted a certain level of free allowances to guard against cheaper imports. In the following years global business recessions caused the price to collapse twice. As a result it has only recently become a successful instigator of decarbonisation with the EU ETS price at 100 euros/tonne; the UK ETS is currently far less effective because of a decision to increase more free allowances to heavy carbon emitting industries. New reforms are expected for the UK ETS, otherwise the economy will be hard hit by the need to pay CBAM (Carbon Border Adjustment Mechanism) tariffs on exports to the EU.
Currently the EU ETS is planned to be extended to road transport and heating emissions which will have a more direct impact on citizens, European countries can adopt a national carbon tax instead and Austria has adopted the Klimabonus climate income policy.
The Green Party proposes a carbon price starting at £100 per tonne, increasing to £500 in 2030, imposed upstream, ie. at the point of production so that it is passed on as a price rise to consumers rather than a price at the point of use, (currently oil and gas producers do not pay ETS as that is levied on emissions at point of use).
Molly explained that the Green Party do not plan to hypothecate carbon pricing so it will go directly to the Treasury’s general revenue pot. This is where their policy differs from Climate Income as implemented in Canada and increasingly Europe where it is returned to citizens as a more or less universal dividend, (see Policy in Depth for background information on CI schemes). They propose using the carbon price to support the rest of their decarbonising policies such as street by street retrofitting, with some monies going to the poorest in society. A universal basic income, they argue will offer fairness and they prefer not to encourage spending through a carbon dividend to all.
There was a lively discussion on the merits or otherwise of the two approaches, carbon pricing without dividends has been successful in Scandinavian countries where the government is trusted and the wellbeing of all citizens is prioritised but has been disastrous in France where fuel taxes were introduced shortly after tax cuts for the rich.
*In the UK the Liberal Democrats endorses associating the UK ETS with the EU ETS and may then endorse a similar policy to Austria. The SNP probably has a similar approach – let us know!