UK Businesses Shouldn't Pay The Price For Climate Change, Says BCC

by Jason Gorringe, Tax-News.com, London

31 October 2006

Following the publication of the Stern Review on the Economics of Climate Change on Monday, business organisations have spoken in broad support of the conclusions of the review, but have urged the UK government to ensure that the sector does not bear the brunt of any proposed changes.

The Review, which reports to the Prime Minister and Chancellor, was commissioned by Gordon Brown in July last year. It was carried out by Sir Nicholas Stern, Head of the Government Economic Service and former World Bank Chief Economist.

Sir Nicholas stated on Monday that:

“The conclusion of the Review is essentially optimistic. There is still time to avoid the worst impacts of climate change, if we act now and act internationally. Governments, businesses and individuals all need to work together to respond to the challenge. Strong, deliberate policy choices by governments are essential to motivate change."

"But the task is urgent. Delaying action, even by a decade or two, will take us into dangerous territory. We must not let this window of opportunity close.”

The Review found that all countries will be affected by climate change, but it is the poorest countries that will suffer earliest and most. Unabated climate change risks raising average temperatures by over 5°C from pre-industrial levels. Such changes would transform the physical geography of the planet, as well as how and where we live our lives.

Adding up the costs of a narrow range of the effects, based on the assessment of the science carried out by the Intergovernmental Panel on Climate Change in 2001, the Review calculated that the dangers of unabated climate change would be equivalent to at least 5% of GDP each year.

The review also examined the national and international policy challenges of moving to a low-carbon global economy.

It stated that:

"Climate change is the greatest market failure the world has seen. Three elements of policy are required for an effective response."

"The first is carbon pricing, through taxation, emissions trading or regulation, so that people are faced with the full social costs of their actions. The aim should be to build a common global carbon price across countries and sectors."

"The second is technology policy, to drive the development and deployment at scale of a range of low-carbon and high-efficiency products. And the third is action to remove barriers to energy efficiency, and to inform, educate and persuade individuals about what they can do to respond to climate change."

"Fostering a shared understanding of the nature of climate change, and its consequences, is critical in shaping behaviour, as well as in underpinning both national and international action."

Commenting on the report's publication, David Frost, Director General of the British Chambers of Commerce, announced that:

“With over 60 million people living in the UK businesses must not be singled out as the ones to pay higher taxes to tackle climate change."

“Business is showing increased willingness to become more energy efficient and the government should continue to work with us rather than simply raise taxes. If green taxes are to be raised then it is crucial that they are offset by reductions elsewhere. It would be counter productive for UK businesses to be hindered on the world stage by an uncompetitive tax regime."

“Organisations such as the Carbon Trust need to refocus their efforts so that it is made easier for small and medium sized businesses to become more energy efficient. By working together business and the government can really make a difference and help the UK become global leaders in tackling climate change.”

Meanwhile, according to reports in the UK media, a leaked letter from Environment Secretary David Miliband to Chancellor Gordon Brown has proposed a number of new 'green taxes' in order to cut carbon emissions in the UK.

The UK's Daily Mail quoted Mr Miliband as writing that: "Market-based instruments, including taxes, need to play a substantial role."

According to reports, the measures proposed in the letter include holding fuel prices steady when oil prices drop, increasing road taxes for higher emission vehicles, and increasing air passenger duty, a suggestion which has caused outrage amongst the country's budget airlines.

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