This Commons Library briefing discusses the approach of Labour, Coalition and Conservative Governments since 2010 to taxing road fuels.
The e-petition calls on the Government to introduce charges on carbon emissions to tackle the climate crisis and air pollution. It received 108,802 signatures. The petition in full states:
Air pollution kills 64,000 people in the UK every year, yet the Government provides annual fossil fuel subsidies of £10.5 billion, according to the European Commission. To meet UK climate targets, the Government must end this practice and introduce charges on producers of greenhouse gas emissions.
A ‘carbon charge’ would encourage industries and organisations to reduce their carbon emissions, and could raise billions for the UK economy. The Government can ensure the charge does not unfairly impact those who cannot afford to pay by using some of the money raised to support low income households through the low-carbon transition. The UK should also utilise its position as host of COP26 and the G7 summit to drive global progress on carbon pricing.
Current Carbon Charges
The Government response to the petition refers to the UK Emissions Trading Scheme (ETS). The UK ETS sets a limit on emissions from energy generators and energy intensive industries, which incur a cost if limits are exceeded. The Government response also points to the Government’s intention (set out in the Energy White Paper) to extend the scheme, and to explore expanding the UK ETS to cover two thirds of the UK’s remaining emissions.
Carbon pricing can take a wide variety of forms. There were some reports that the Government was considering the options for broader carbon taxes or pricing earlier this year, but that it is no longer the case.
Fossil fuel subsidies
The 2019 European Commission report mentioned in the petition found that the UK fossil fuel subsidies were the highest in the EU in 2016. The Government response to the petition points out that the European Commission report uses the broader OECD definition of fossil fuel support (developed jointly with the International Energy Agency (IEA). The definition covers “budgetary transfers and tax expenditures that provide a benefit or preference for fossil-fuel production or consumption”. The Government response explains that the UK follows the narrower IEA definitions of fossil fuel subsidies, This definition covers “fossil fuels that are consumed directly by end-users or consumed as inputs to electricity generation”. The response does not provide a figure based on this definition.
A CarbonBrief explainer on the challenge of defining fossil fuel subsidies provides further background on this.
Air quality and climate change
Emissions from burning fossil fuel cause climate change and air pollution, so policies that reduce emissions should also have the benefit of improving air quality. An Environment, Food and Rural Affairs Select Committee report on air quality in February 2021 noted that, depending on the study, air pollution had been linked to around 40,000 or 64,000 early deaths a year in the UK. In its report, the Committee called for a range of provisions on air quality to be included in the Environment Bill, in addition to the existing Government provisions requiring the introduction of two air quality targets by 2022.
In its response to this petition, the Government also highlighted its support for the roll out of electric vehicles (EVs) and policies that increased costs of diesel vehicles. Further information on Government policies can be found in the Commons Briefing on the Transport Decarbonisation Plan.
Transition to low carbon
In 2019, the Government set a legally binding target for the UK to achieve net zero emissions by 2050. In November 2019, the Treasury began a net zero review “to consider how the transition to net zero will be funded and assess options for where the costs will fall”. The Treasury’s Net Zero Review report was published on 18 October 2021. This set out the Government’s approach to protecting lower income families from the costs of the transition. The review found that lower income households consume less carbon but spend a higher share of their income on high carbon goods:
However, there is substantial variation within income groups driven by factors such as how much energy they use, the type of house they live in, and whether they drive a car; these factors will have a significant influence over a household’s overall exposure to the transition.
It concluded that the most effective approach to address this was to provide targeted support to low-income groups:
Given the significant variation within income groups, it will be more effective to focus on individual technology transitions, with taxpayers providing targeted capital support for those low-income groups most acutely affected by a specific technology transition(and in advance of policies that penalise or phase-out use of high carbon technologies), than to consider the transition in aggregate and develop universal and untargeted policies to support households – such as, changes to tax and welfare. This would also mean that low-income groups could benefit sooner from the household savings that arise from a transition.
This briefing gives an overview of rising prices, particularly food, energy and fuel prices, including the potential effect of the conflict in Ukraine. It outlines Government support as well as how rising prices, interest rates and other policies which will affect household budgets.
This page features Commons Library publications relevant to the current crisis in Ukraine.