Engineering news
Government should move away from green taxes which penalise businesses and instead use tax incentives to reduce carbon according to a report published by EEF, the manufacturers’ organisation.
The report, The Low Carbon Economy – From Stick to Carrot, forms EEF’s response to the review of carbon taxes announced by the Chancellor in the Budget statement and comes ahead of climate change talks in Paris later this year.
According to EEF, following a decade of tinkering the UK now has a "bewildering mix of energy efficiency schemes and taxes" that have pushed up energy costs and increased red tape without a big enough impact on emissions. This has also made the price of energy for many industries much higher than those faced by European competitors. The report urges government to take a bold new approach to energy and climate change policy to tackle these issues.
As companies look at new technologies which will dramatically reduce their carbon emissions, EEF is also urging ministers to widen their review of all aspects of business energy efficiency taxation and consider introducing tax credits as incentives for business to reduce emissions.
Paul Raynes, EEF director of policy, said: “The current system of energy taxation is too complex and is hurting Britain’s competitiveness. So instead of simply hitting firms with the big stick of ever-higher carbon taxes and levies, we should be offering them the carrot of tax breaks to invest in advanced low carbon technologies. “
“Government should use the energy taxation review as an opportunity to step back, and make some bold decisions that we believe can reduce energy costs as well as cutting back on carbon emissions, and improving the environment.”
EEF said government should begin by scrapping the Carbon Floor Price and the “overly-complex” Carbon Reduction Commitment (CRC) energy efficiency scheme along with the introduction of a new energy efficiency tax discount to better drive investments in energy efficiency.
It is estimated that the Carbon Price Floor will cost energy consumers £23 billion between 2013 and 2020 but only £6.5 billion of this will achieve its intended aim of supporting investment in renewables. Similarly, the CRC energy efficiency scheme is estimated to cost businesses almost £900 million in 2015/16 alone, but is only expected to deliver £334 million of investment over the next decade. EEF research suggests a new incentive scheme could deliver ten times as much new green investment.
The report also calls on government to develop decarbonisation action plans for key energy intensive sectors, explore financing options that can deliver the major investments required and develop a targeted innovation programme to bring forward the technological solutions required.
Raynes said: “Greening heavy industry can’t happen without rolling out radical new technologies that are still far from fully developed, or financially viable, and doing that quickly. Industry wants to step up to the plate but the economics say it cannot do so alone. This must be a partnership between business and government. If we can’t put roller skates under the new green technologies, existing tax policies will undermine these fundamental British industries to no environmental gain in the long run.”
The EEF said that it would also like to see government do more to ensure UK manufacturers can take a slice of the global market for low-carbon environmental goods and services, already estimated to be worth £3.4 trillion in 2011/12, while meeting the UN’s goal of keeping average global warming to 2°C, which is expected to require $1 trillion (£0.65 trillion) to be spent on clean energy systems alone each year by 2030, providing considerable opportunities for suppliers of suitable technologies.
In particular, EEF said it would like to see government increase the percentage of government R&D funding spent on energy and environment to the EU average, better signpost public money and support available and ensure that the wider regulatory environment encourages innovation.