Carbon tax impact on industry limited

11th January 2016


Related Topics

Related tags

  • Mitigation ,
  • Generation ,
  • Conventional

Author

Natalie Makin

Only a small number of industries would incur increases in production costs that could damage their competitiveness if a carbon tax was introduced in the UK, according to a new report.

The study was carried out by climate change researchers at the London School of Economics and Political Science. It considered the impact on industries and consumers of introducing a carbon tax on all fuels equal to £20 a tonne of carbon dioxide equivalent.

Taxing energy consumption on this scale would mainly affect the oil refinement, coal, iron and cement sectors, the researchers found. These industries account for around 2% of UK GDP, they estimated.

Consumer prices would rise by up to 0.9%, assuming all costs were fully passed along the supply chain, according to the report. However, the authors believe cost increases are likely be lower as the introduction of the tax would lead to behavioural change and business innovation, while tax revenues from carbon pricing would be recycled back into the economy.

“Carbon policies will provide incentives to increase energy efficiency and resource productivity which could afford UK producers a competitive advantage in the long term, in a world where fossil fuel prices could rise and carbon reduction policies are likely to become more widespread and ambitious,” the report states.

The researchers conclude that, instead of resisting a carbon tax, the government should introduce policies to protect vulnerable sectors, such as those that emit high levels of greenhouse gases and are exposed to international trade. “Countries and firms that resist enduring change and innovation may not be acting in their long-term interests,” the report states.

Richard Warren, senior energy and environment policy adviser at manufacturing trade body EEF, said sectors exposed to international competition, such as steel and paper, are unable to pass the costs of a carbon tax along the supply chain and would therefore lose out.

“Reducing emissions from industry is a highly complex challenge and, as the report notes, tailored policies need to be in place to both protect competitiveness and help address the commercial and technological barriers to decarbonisation,” he said.

Industrial decarbonisation strategies being produced by the energy and climate department (Decc) would hopefully help companies improve efficiency and reduce greenhouse gas emissions, he said.

Many firms already face carbon prices at least as high as that considered by the report as a result of UK and EU government policy. “If the desired pace of change is not being achieved, we must look beyond the use of rather blunt price signals to more complementary measures that can more effectively help bridge the so-called energy efficiency gap,” Warren added.

Subscribe

Subscribe to IEMA's newsletters to receive timely articles, expert opinions, event announcements, and much more, directly in your inbox.


Transform articles

How much is too much?

While there is no silver bullet for tackling climate change and social injustice, there is one controversial solution: the abolition of the super-rich. Chris Seekings explains more

4th April 2024

Read more

One of the world’s most influential management thinkers, Andrew Winston sees many reasons for hope as pessimism looms large in sustainability. Huw Morris reports

4th April 2024

Read more

Alex Veitch from the British Chambers of Commerce and IEMA’s Ben Goodwin discuss with Chris Seekings how to unlock the potential of UK businesses

4th April 2024

Read more

Regulatory gaps between the EU and UK are beginning to appear, warns Neil Howe in this edition’s environmental legislation round-up

4th April 2024

Read more

Five of the latest books on the environment and sustainability

3rd April 2024

Read more

Ben Goodwin reflects on policy, practice and advocacy over the past year

2nd April 2024

Read more

In 2020, IEMA and the Institute and Faculty of Actuaries (IFoA) jointly wrote and published A User Guide to Climate-Related Financial Disclosures. This has now been updated to include three key developments in the field.

2nd April 2024

Read more

Hello and welcome to another edition of Transform. I hope that you’ve had a good and productive few months so far.

28th March 2024

Read more

Media enquires

Looking for an expert to speak at an event or comment on an item in the news?

Find an expert

IEMA Cookie Notice

Clicking the ‘Accept all’ button means you are accepting analytics and third-party cookies. Our website uses necessary cookies which are required in order to make our website work. In addition to these, we use analytics and third-party cookies to optimise site functionality and give you the best possible experience. To control which cookies are set, click ‘Settings’. To learn more about cookies, how we use them on our website and how to change your cookie settings please view our cookie policy.

Manage cookie settings

Our use of cookies

You can learn more detailed information in our cookie policy.

Some cookies are essential, but non-essential cookies help us to improve the experience on our site by providing insights into how the site is being used. To maintain privacy management, this relies on cookie identifiers. Resetting or deleting your browser cookies will reset these preferences.

Essential cookies

These are cookies that are required for the operation of our website. They include, for example, cookies that enable you to log into secure areas of our website.

Analytics cookies

These cookies allow us to recognise and count the number of visitors to our website and to see how visitors move around our website when they are using it. This helps us to improve the way our website works.

Advertising cookies

These cookies allow us to tailor advertising to you based on your interests. If you do not accept these cookies, you will still see adverts, but these will be more generic.

Save and close