As I\’ve been saying for years now:
The Office of Fair Trading today published a report concluding that the reason petrol prices have risen so high is due to fast-rising taxes and higher oil prices.
If the Stern Review\’s carbon tax had been implemented that would have meant around 11 p on a litre ($80 per tonne CO2-e x emissions from one litre).
The fuel duty escalator was introduced back in the 90s and we were told that it was \”to meet our Rio commitments\”. I.e, that it was indeed a carbon tax. That escalator has added over 25 p to the cost of a litre.
Ergo, a proper carbon tax would lower the price of petrol. For here\’s the point about Pigou Taxes. They do not mean that tax rates must be higher. Rather, they argue that there is an optimal tax rate: which can indeed be lower than the one currently charged.
We can go further. A proper carbon tax would apply to all of the UK\’s 500 million tonnes of emissions. Say, $40 billion a year. Or around £25 billion say. £28 billion maybe.
And a carbon tax is indeed the complete and total solution to climate change. It is not necessary to do anything else at all.
The thing is, we\’re already paying that carbon tax. We already pay \”green taxes\” of that amount. Not quite on all the right things, we pay too much on petrol and not enough on some other emissions.
But a proper carbon tax, that complete solution to climate change, all we\’ve got to do is move around the taxes we already pay. And then we\’re done.
Interesting, isn\’t it?