Who pays for our low-carbon future?

Poor could bear the cost of UK climate policies, says report

2 August 2010

CSE is soon to publish a piece of work on behalf of Eaga Charitable Trust that examines the costs of policies designed to tackle climate change – and concludes these could be borne disproportionately by the poor.

The ‘Distributional Impacts of UK Climate Change Policies’ looks at a range of low-carbon policies – from the EU Emissions Trading Scheme through to feed-in tariffs and smart meters – and works out what each policy is likely to cost and how the costs will be recovered.

“The critical issue is whether the costs are recovered through people's energy bills or through income tax” said Ian Preston who managed the research.

“If it’s the former, than those who will be hit the hardest are the poor, who spend proportionally much more of their income on gas, electricity and heating oil.”

Simon Roberts, CSE's Chief Executive, said: “Our research shows that the energy-bill route to recover the cost of climate-change policies is more regressive – it hits the poor harder than the rich – than the income taxation route.”

“However, it’s unlikely that this current administration will use income tax to fund these measures – which could run to billions of pounds – so energy bills will be the cost-recovery vehicle of choice. CSE is calling on the Government to think of the poor, the vulnerable, the elderly and the disabled, and ensure that this is done as fairly as possible."

And, as CSE, we are in a position to make our voice heard in the new Coalition. A paper recently published by the Department of Energy and Climate Change (July 2010) called ‘Estimated impacts of energy and climate change policies on energy prices and bills’ draws on evidence CSE provided in a similar policy-impacts study to the one described above [click to download].

“We all know that public services and funding are facing unprecedented cuts” said Ian. “And whilst the funding of measures via gas and electricity bills represents an unconstrained way of paying for the necessary reductions in carbon emissions, we must nevertheless carefully consider the impacts of these costs to ensure they do not fall unduly on the vulnerable and the poor.”

Read more about the ‘Distributional Impacts of UK Climate Change Policies’ here

photo: lydiashiningbrightly | reproduced under creative commons

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