Memorandum submitted by Greenpeace
Greenpeace believes that in the light of increased
evidence about the impact and urgency of climate change that the
attempts to tackle it in the Pre-Budget Report (PBR) have generally
been weak and are likely to be ineffective, although with notable
exceptions such as the initiative on zero-emission homes. Progress
on incorporating environmental considerations into Treasury policy
has been far too slow and partial. Nor does there seem to be a
coherent strategy at its core. In particular the Treasury needs
to decide objectives of policy, and whether fiscal measures and
taxation are being employed as a means of pricing externalities,
or whether they are being used as instruments of policy to change
behaviour and purchasing decisions. Fiscal measures to affect
behaviour through a purely market mechanism would in some sectors
need to be much larger than those which would, from an economically
dogmatic point of view, only include the social cost of carbon.
This submission will address most of the bullet
points raised in the call for evidence.
REFLECTION OF
THE STERN
REVIEW
The Stern review findings have found very little
reflection in the PBR. The Stern Review emphasised policies of
fiscal measures, carbon pricing and technology R&D. PBR only
covered only ONE of these and only to a very small extent—the
first of these. The headline measures of PBR were the doubling
of Air Passenger Duty and a small increase in vehicle fuel duty.
We are unaware of any evidence that these will affect carbon emissions
in the aviation and surface transport sectors. The elasticity
of demand for road vehicle fuel is known to be relatively low,
and the inflationary rise is most unlikely to affect travel behaviour
given the large fluctuations in fuel costs recently. The increase
in APD is welcome as a short-term measure to increase prices,
however it is not nested in a longer term strategy for continuing
to increase the cost of flying (see below). There are significant
uncertainties over the elasticity of demand for air travel, but
raising the costs of tickets through APD may well have an impact.
[4]
The further more general point made by Stern,
that it is economically worthwhile to spend now in order to prevent
much larger economic impacts later has also found no reflection
in the PBR, nor any process to attempt to do so.
INFRASTRUCTURE
The Stern review did not address infrastructure
as explicitly as it should have—pricing carbon and fiscal
measures can only partially affect long-term infrastructure decisions,
for example on building construction, appliance purchase, choice
of vehicle and form of the energy and power system. This is because
running costs are rarely considered at the point of investment,
and the criteria for purchase of eg a new car or fridge, are numerous
and generally include several that are more pressing to the purchaser
than environmental considerations. [5]Under
these circumstances fiscal measures and changes in taxation need
too be part of a broader strategy of standards and regulation.
It is well-known that the Treasury has considerable influence
on domestic policies in all departments. In fact, the PBR had
an excellent example of how joining up policies can be done—the
very welcome initiative on zero-emissions homes from DCLG, combined
with changes to stamp duty in PBR. However, joined-up Government
is not always displayed. There seems to be very little coherence
between raising APD (ostensibly on climate grounds) and the DfT's
Aviation White Paper advocating further growth of airports and
demand expansion.
AVIATION
In addition to comments above, we believe that
VAT should be applied immediately to ticket prices for domestic
flights in UK. We are in a considerable minority in the EU in
not doing so (the others being Ireland, Denmark and Malta[6]—and
we assumes that the number of purely domestic flights in Malta
is rather limited). The UK should take the initiative in getting
intra-EU flights subject to VAT.
Including a carbon price in flight tickets would
be a useful measure, however, some figures produced by DfT suggest
that even large increases in the cost of carbon would have little
impact on flight numbers, [7]and
that any burden of either taxation or charges would need to be
very burdensome in order to contain expansion of aviation emissions.
This emphasises the importance of a joined up strategy for containing
the growth of aviation including a cap on flights. Financial measures
alone will not be enough. Further, recent remarks by Environment
Minister Ian Pearson[8]
demonstrate that aviation industry responsibility cannot be expected
and that Government will need to take a firm lead.
BIOFUELS
We do not believe biofuels should be incentivised
or given a target under the Renewable Transport Fuels Obligation
until mechanisms are in place to prevent perverse outcomes of
biofuel promotion. EU promotion of biofuels is about providing
an income stream for farmers and reducing CO2 emissions. However,
inadequate implementation of climate and sustainability certification
would very likely lead to opening of a commodity international
trade in biofuels grown under "lowest common denominator"
standards, encouraging the conversion of ancient forests in Indonesia
or savannah grasslands in Latin America. Greenpeace has written
to Rt Hon David Milliband together with FoE, RSPB and WWF to say
that we cannot support the proposed RTFO because it has inadequate
safeguards. Indeed without these safeguards, Greenpeace would
advocate a ban on imports from countries where forest and ancient
grassland habitat "conversion" is taking place. We do
not regard it as appropriate for biofuels to be the subject of
concessional tax arrangements.
NEW BUILDINGS
We very much welcome the initiative on zero-emissions
home, and that taxation (through stamp duty) is being aligned
with initiatives from other Government departments, to realise
an ambitious target, through building regulations and planning.
We would like to see this extended to all kinds of buildings and
not just domestic properties.
SUPPORT FOR
MICRO-GENERATION
AND ENERGY
EFFICIENCY PROGRAMMES
Given the over-subscription of the Low Carbon
Building Fund the failure to give adequate support to these developing
technologies is an utter failure of governance. It would appear
that previous monies have only been forthcoming after political
pressure from the Opposition. There appears no conception in Treasury
of the value of localised generation; supplying power to buildings
is not just about generating electricity, but getting it from
the point of generation to the point of use. The IEA estimates
that for most developed countries the capital costs of transmission
and distribution will be similar to that for generation out to
2030. Decentralised generation avoids these costs. Whilst the
avoidance of income tax for individuals on the revenues from sales
of power (as announced in the PBR) is worthwhile, we understand
that a larger barrier to local generation is that it is difficult
to get a reasonable price from the distribution companies for
exported power. This particularly applies to small companies and
energy providers, something missed simply by discussing "microgeneration".
Greenpeace believes that it is the SME sector that is most likely
to lead in getting decentralised generation going, not the individual.
A similar point could be made about Energy Efficiency.
It is impossible to ignore that much energy wastage is a consequence
of ignorance and behavioural choices. Global Action Plan has conducted
studies in schools, businesses and even households which largely
looked at behavioural change through peer support and community
building. [9]Savings
on energy are around 20% (with wide variation) in schools and
over 20% in households. It is noteworthy that roll-out of this
programme in schools across the country is estimated to cost £4
million over three years with estimated savings to the public
purse of £50 million per year. [10]Failing
to develop this programme is, therefore, not only environmentally
irresponsible, but financially absurd.
Statements from Gordon Brown on the price of
power suggest that the Treasury is still wedded to "cheap
power" as a medium of economic growth, and the power of the
market in delivering this. This philosophy has:
(1) Failed—price rises have gone up
very greatly over the last few years.
(2) Gets in the way of energy policies which
develop environmental responsibility and security.
A long term strategy to deal with energy would
not purely focus on low-cost generation to the exclusion of other
considerations. The financial framework, despite some attempts
to change recently, is still biased in favour of large power producers
because of tax breaks including ratable values and corporation
tax.
More generally localized generation, including
CHP systems larger than homes, has much to offer in emissions
savings and efficient use of fuel. Decentralised generation of
power also reduces the need for expensive upgrades of the transmission
and distribution electricity grids. A study by the World Alliance
for Decentralised Energy, using an economic model used by Foreign
Office, German and Canadian Governments amongst others, demonstrates
that decentralizing power could deliver CO2 emissions and gas
savings of 17% and 14% respectively compared to a conventional
power generation route with nuclear power. This is because the
conventional power generation system wastes enormous amounts of
heat in cooling water and up cooling towers. It would also be
cheaper both in capital costs and retail costs.
CARBON CAPTURE
AND STORAGE
We believe that under the "polluter pays"
principle, the costs of dealing with CO2 emissions from fossil
fuel power stations should be borne by the generators, and the
development of this technology, if it works, should not be borne
by the taxpayer. Government needs to act as regulator and establish
standards, not to subsidise polluters to cope with their problems.
January 2007
4 Cairns, S and Newson C, 2006. Predict and Decide.
Environmental Change Institute, Oxford. Back
5
In our discussions with companies including the refrigeration
service sector, we have been told on numerous occasions (and with
considerable frustration) that large organisations like supermarkets
and Government departments still do not consider running costs
in investment decisions on cooling even thought eh capital costs
may be only 20% or less of the life-cycle costs. Back
6
Cairns and Newson, ibid p 82. Back
7
DfT, The Future of Air Transport Progress Report. Table C1, Annex
C, December 2006 http://www.dft.gov.uk/stellent/groups/dft_aviation/documents/page/dft_aviation_613841.pdf Back
8
Guardian, 8 January 2007. Back
9
Global Action Plan Programmes overview, August 2003. Back
10
Personal communication, Alexandra Hollingsworth, Global Action
Plan. Back
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