Source · Select Committees · Environmental Audit Committee
Recommendation 37
37
Paragraph: 228
One of the most economically efficient ways to incentivise low-carbon choices would be through the...
Recommendation
One of the most economically efficient ways to incentivise low-carbon choices would be through the introduction of an economy-wide carbon tax. The Government should begin scoping work on a carbon tax to incentivise low-carbon changes across the whole economy.
Paragraph Reference:
228
Government Response
Acknowledged
HM Government
Acknowledged
Putting a price of carbon throughout the economy, either through carbon taxes or emissions trading, is considered by economists to be an efficient way to incentivise decarbonisation. The UK already has two forms of carbon pricing - a UK Emissions Trading Scheme, which is a market-based measure that will deliver a robust carbon price covering emissions in power, industry and UK-EEA aviation. The Energy White Paper, published in December 2020, committed to exploring expanding the UK ETS to the two thirds of uncovered emissions, and set out the Government’s aspirations to continue to lead the world on carbon pricing in the run up to COP26. The other policy is the Carbon Price Support, that taxes fossil fuels used in electricity generation. Both of these policies price the carbon emissions generated by businesses, who then pass these costs on to consumers. Before taking any decisions on expanding carbon pricing beyond what has already been committed to, Government needs to understand the distributional impacts and where the cost may fall or be passed on to those less able to pay. The Treasury’s Net Zero Review will consider the role of tax, alongside other levers, in meeting net zero as well as managing the impacts and costs of the transition.