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UK carbon tax risks not delivering emissions reductions; sends troubling signal ahead of COP 26 - IETA

12 Oct 2020 9:00 AM | Anonymous member (Administrator)

GENEVA, 12 October - Media reports last week indicate that the UK Government may now favour a post-Brexit carbon tax rather than an Emissions Trading System (ETS).

IETA has urged the UK to set up a new national ETS as the most efficient, cost-effective, and transparent mechanism for achieving the UK’s climate targets. It would build on nearly two decades of British leadership in emissions trading, as evidenced in the carbon markets it helped to foster abroad. Carbon markets are now the primary climate policy operating in the EU, California, Canada, South Korea and China.

“The crucial benefit of an ETS is that by placing emissions under a cap it produces a defined and legally binding reduction in greenhouse gas emissions. In contrast, carbon taxes do not offer environmental guarantees, so they put the environmental goal at risk,”  said Adam Berman, EU Policy Director. “That means the UK would be taking a big gamble on whether it will meet its net-zero goal.”

IETA has also raised serious concerns that a carbon tax is not capable of providing certainty of future pricing levels. 

“A carbon tax may look appealing when government seeks to raise revenues, but the environmental reality may disappoint," Berman said.

"Experience shows that because taxes are highly politicised, no Government can provide long-term certainty over future pricing levels. Do we really want to take a chance on a UK carbon tax that might become a political football, putting in jeopardy popular support for carbon pricing amongst the general public?,” he asked.

Although national climate efforts are critical, the proposed carbon tax might have ramifications beyond the UK. Berman noted that “struggling to implement a carbon tax months before the UK hosts COP 26 would send a troubling signal to the international community.”

“The UK remains a vocal proponent for climate action, particularly through market cooperation under Article 6 of the Paris Agreement. By adopting a carbon tax instead of an ETS, the UK would find it harder to provide market linkages with international partners,” Berman added.

“This would weaken its ability to participate in multilateral solutions to climate change, compromise its position as a global leader in the climate sphere, and risk its reputation as a strong advocate for international carbon markets.”

“In sum, a carbon tax fails to guarantee the climate goal, makes life harder for industry at a time of economic crisis, and diminishes UK climate leadership when it is needed the most. Climate action is too important to risk on a tax that is unlikely to succeed at its key task – reducing emissions”, Berman said.

Adam Berman will be appearing before the BEIS Select Committee on Thursday 15th October to stress the case for choosing an ETS over a tax.

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