Matt is Director of The TaxPayers' Alliance.
Over the weekend Tim reported that David Cameron has been backing a carbon tax proposed by Julia Gillard – Australian Labor Prime Minister – and fiercely opposed by the conservative Liberal Party there. The Prime Minister wrote to her that it would "add momentum to those, in both the developed and developing world, who are serious about dealing with this urgent threat." In other words, the Americans look about as likely to pass cap and trade as they are to proclaim Herman van Rompuy their king. And the Chinese won't accept binding limits on emissions that are likely to ultimately limit economic growth. But if the Australians put a carbon tax in place Europe's political class can go on pretending that the rest of the world is just behind them. After all, even the Climate Change Act 2008 Impact Assessment reported that the "economic case for the UK continuing to act alone where global action cannot be achieved would be weak". They can only keep up the pretence this isn't a unilateral dead end for so long.
If the Prime Minister wants to get involved in climate change policy he should focus on problems closer to home first. Just last week the Department of Energy and Climate Change (DECC) published a report which estimated that prices would rise for large energy intensive users by up to 52 per cent by 2020, with a central estimate of a 31 per cent rise.
Unfortunately, this may be about as reliable as their farcical estimates for domestic consumers. In their estimates for domestic consumers, DECC accept that around £200 billion needs to be invested in the network principally to meet environmental targets. That has to mean higher profits, higher prices and then higher bills, that's how we pay for it all. As a result, Citigroup expect real terms increases in bills of over 50 per cent. Even with greater efficiency that increase will still be over 30 per cent, and that is before you count the cost of measures like greater insulation that don't come for free. But the Department think that they can somehow require all that investment and it will only add 1 per cent to bills.
Sure enough, there are problems with the new estimates for industrial customers. Jeremy Nicholson, Director of the Energy Intensive Users Group, thinks that:
There are a number of weaknesses in DECC’s analysis which are of concern to EIUG members. These include questionable assumptions about future fossil fuel prices and the likely trend in underlying wholesale electricity prices (ex environmental costs), the degree of pass through of carbon and renewable subsidy costs by generators and suppliers, the scope for reductions in energy consumption by intensive users and the lack of transparency in accounting for the impacts of climate policies on transmission, distribution and balancing costs.
Energy intensive industries employ huge numbers of people. They are also important to making all sorts of other businesses viable in the UK. And energy costs are important, if not as absolutely critical, for other industries too. If we keep going with unilateral climate policy we'll drive lots of industrial capacity abroad and make little difference to the global climate.
There are plenty of other problems with taxes and regulations politicians have put in place here to try and limit greenhouse gas emissions. I talk about just how badly we are being let down by climate change policy in my new book Let them eat carbon – out next week and available to pre-order now. As the polling Tim cited shows, Australians don't want to make the same mistakes. If David Cameron wants to lead a Government that restores our country to economic and fiscal health then he needs to look at these major burdens on families and businesses here, not undermine conservative allies abroad.