The UK and Czech Republic yesterday suggested that they might depart from the standard formula on reducing greenhouse Gas Emissions, and use a ‘light touch’ in order to reach their 2030 target.  Read about it here.

Don’t be fooled into thinking that this lets the UK off the hook on the targets.  Far from it.  It is more likely to increase the UK’s environmental tax base.

The central revenue generator for emission taxes is the EU ETS which covers the following: power, iron\steel, ceramics, cement, refineries, pulp, glass, air travel, and from 2016 shipping.  It covers the following gases: sulphur hexafluoride, per fluorocarbons, hydro fluorocarbons, methane and nitrous oxide.  The methodologies are standardised by the EU and the system is inflexible.

What the UK is proposing is called a Nationally Appropriate Mitigation Action (NAMA).  This means that the UK can effectively expand the ETS according to its own whim.  It could, for example, include methane gasses from agriculture or methane gasses released from digging up the ground, or emissions from cars.  It could include new gasses like NH3 or NO2.  Additionally it can reward carbon sinks or nuclear power stations for their ‘carbon savings.’  In other words, the UK is proposing that it awards itself the flexibility to decide how it hits its targets.  Hitting any of these targets will require some form of credit that is bought from the Government, typically through an auction process.  The proceeds of which are kept as direct taxation.  In effect, what the UK is proposing is an increase in revenue generated from environmental legislation.  Currently this sits at 2.6% of GDP, and by changing parameters the Government can increase this up.  Being an environmental charge it is an easy sell to the population, and are welcomed by the sectors as they involve a subsidy followed by higher prices, and they tend to be quite a small slice of the consumer cost (and with higher prices comes, in most cases, a higher VAT take).

Please do not view this proposal by the UK as anything other than a very bad thing.  I have had discussions with DECC over the years and NAMAs have long been on the agenda.


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