A key conclusion of the recent report from the Royal Commission on Environmental Pollution is that if hum-anity is to prevent damaging climate change, then developed nations like the UK must take the lead in making large reductions in greenhouse gas emissions.
If the UK takes drastic action ahead of other nations, however, we risk harming the competitiveness of our economy. Indeed, investment in energy-intensive industries might be diverted to countries where energy is used very inefficiently, which will increase global emissions of greenhouse gases. With two economists and two people with extensive business experience among its members, the commission was highly aware of these dilemmas.
We do not expect the government to commit itself to reducing emissions of carbon dioxide by 60% by 2050. No government could make such a long-term commitment. If the majority of developed nations failed to offer similar reductions then we doubt the UK would act in isolation. But we must recognise that if global inaction prevails over the coming decades, our children and grandchildren will suffer from the resulting climate changes, and the earth’s poor will suffer most.
In the short to medium term, practical leadership is crucial in the international negotiations on climate change abatement. The UK and the European Union should continue to provide it. At home, that means developing energy and environment policies now which make cuts of around 60% by 2050 attainable. We need, in short, to move onto the right pathway. The government’s goal of reducing CO2 emissions by 20% from their 1990 level by 2010 is an excellent start; now we need a programme to put that ball in the net and prevent emissions from rising after 2010.
Taxing fuels according to how much CO2 they produce is one of the most important of the commission’s recommendations. Unlike the climate change levy this `upstream’ carbon tax would not exempt households. We want the government to argue strongly for its introduction across the EU, but to go it alone if necessary.
We favour trading in emission quotas and want the UK to become the world centre for international trading. But it would be very difficult to devise a scheme which covered the millions of households and small businesses that produce so much of the country’s CO2. Tradeable emission quotas are not the whole answer.
A carbon tax should be set at a low level initially. The revenues so raised should be used to reduce fuel poverty; to promote energy conservation and the development of alternatives to fossil fuels; and to reduce the impact of the tax on business competitiveness – which could be done by cutting taxes on employment.
Labour costs are, for most businesses, more important than energy costs. By international standards, these have generally not been high in the UK and households and businesses use energy wastefully.
The recent increases in oil and gas prices may, however, be a harbinger of things to come. Even in the absence of a concerted international response to the climate change threat, there are going to be strong pressures to develop new ways of conserving energy and alternatives to fossil fuels. The UK lags well behind in harnessing the greener energy technologies of the future – renewable energy sources, heat networks, heat pumps and fuel cells. Expenditure on energy R&D by government has plummeted with no sign of the private sector filling the gap.
We hope our recommend-ations will act as a wake-up call for UK plc rather than simply – and unfairly – being rejected on the grounds that they would damage competitiveness.
Professor Sir Tom Blundell, is chairman of the Royal Commission on Environmental Pollution. Its report is available from www.rcep.org.uk