Friday, 11 July 2008

The next big project for the EU is energy

By Michaele Schreyer and Ralf Fuecks
Published: July 10 2008 18:58

The global energy system is undergoing a structural crisis. At its heart lies the need to restrain climatic change while at the same time dealing with energy security in an era of rapidly growing demand. The widening gap between rising demand for energy and limited resources of oil and gas has, together with speculation, increased fuel prices to record levels. This in turn has raised the spectre of a recession. These combined challenges pose a significant threat to international economic and political stability.
The current make-up of the European Union, with its flagging institutional reform owing to the Irish No vote, is ill-equipped to deal with these challenges. An outdated Nice treaty that does not reflect the new realities of an EU with 27 members is impeding effective decision-making, thereby undermining the EU’s role in a rapidly changing international system that is increasingly being shaped by rising powers such as China, India and Russia. The urgency for institutional reform is quite clear to everyone. Nevertheless, in times like these the EU cannot limit itself to institutional reform alone.
What is needed is a new European Community that can successfully tackle the combined challenges of climate change, energy security and sustainable competitiveness. As the former Commission president Jacques Delors has suggested, the EU needs to build an institution that can facilitate common action in this field. In comparison with the formative years of the Community – when both the European Coal and Steel Community and the European Atomic Energy Community pursued energy-oriented goals – there is a lack of common action to expand the use of renewable energy that mitigates climate change, provides energy security and increases European competitiveness by transforming its economy into an energy-efficient system.
At a time of climate change and escalating energy prices, the EU needs a European Community for Renewable Energy (ERENE) that can overcome our dependence on fossil fuels and meet the energy challenges of the new century. Such a community would create the conditions necessary to take full advantage of the EU’s climatic, geological and hydrological diversity. Thanks to this diversity the EU has the potential to meet its total electricity demand with renewable energy.
This visionary goal, however, cannot be achieved by unco-ordinated individual action by member states alone. ERENE would develop a strategy to facilitate common action for a rapid shift to renewable energy in the electricity sector. Funded by revenue from the European Emissions Trading Scheme, it would support the research, development and dissemination of new technologies, establish innovative pilot projects, promote investments in renewable energy through a common European support scheme and contribute to the development of trans-European smart grids for the integration of renewable energy into the EU’s electricity supply. It would also foster co-operation with non-EU states, particularly those with a large solar potential in the southern Mediterranean.
ERENE could be based either on the provisions for enhanced co-operation between member states under the aegis of the EU, or on a separate treaty. It would help the EU to achieve its climate and energy objectives of reducing greenhouse gases by 20 per cent and reaching a target of 20 per cent renewable energy by 2020. Moreover, it would prepare the ground for long-term targets beyond 2020. In addition, ERENE would boost the EU’s competitiveness by supporting technological development and innovation.
The EU can, by creating ERENE, become a technological leader, facilitate the creation of new “green-collar” jobs, insulate its economy from rising energy prices and be an example in the fight against climate change for the rest of the world. As such, ERENE could, after the creation of a common internal market and a common currency, be a great new integration project for Europe, emphasising the vital importance of common action for Europe’s future and ensuring that the instruments to deal with climate change and energy security are put in place. The EU needs another grand project to regain political momentum and to engage its citizens in a common European modernisation effort.
Michaele Schreyer is the former EU commissioner for budget (1999-2004); Ralf Fuecks is co-president of the Heinrich Böll Foundation, a think-tank and policy network affiliated with the German Greens
Copyright The Financial Times Limited 2008

Scotland must put more of its energy into renewables

Creating generation at home will help to cut fuel bills, says Sarah Boyack.

LAST week saw the launch of the UK Government's Renewable Energy Strategy – with the aim of 15 per cent of our electricity coming from renewables by 2020. In our first eight years in the Scottish Parliament, we managed to achieve our target of 20 per cent early. It was a major achievement. There is a wide degree of consensus that we should now be pushing for 50 per cent of our electricity from renewables by 2020. However, Scotland is falling behind the rest of the UK in our slow progress on microgeneration for households. It's an exciting agenda – with the potential to deliver secure, local green energy. With domestic fuel prices continuing to rise, we need to help people make their houses more energy-efficient and to produce their own heat and electricity. We also need to reduce our CO2 emissions to tackle climate change, so there is a win-win here if we act.There are success stories in Scotland. I've visited several projects in Edinburgh where the city council, local housing associations and householders have installed microgeneration devices. People are now experiencing lower bills – all year round. People get excited by installing renewables – but we also need to tackle homes and buildings that are badly insulated. There has been progress. But I'd like to go even further and require every new house to benefit from renewables.It's important, though, that we don't just focus on new housing. 80 per cent of the buildings that will be standing in 2050 have already been built. The Community Household Renewables Initiative has been very successful in testing the technologies and giving householders grants to install them, but research shows it is not until we have tax breaks that we will see a mass market created.That's why I'm continuing to campaign for the Scottish Government to support my Members Bill proposing that people putting in insulation or installing microgeneration are given a one-off rebate on their council tax. We're still waiting for the new SNP Government to deliver on cutting the red tape for individual householders who want to get on and install microgeneration. It took a year for draft guidelines to appear, but they only give the green light to mini wind and heat pumps when houses are 100 metres apart, and the rules on solar panels are out of step with the most efficient products on the market. Ministers have been lobbied by environmental campaigners and the renewables industry. In a recent debate, the Planning Minister recently told me that he was thinking of changing his approach. But we need to get a move on. • Sarah Boyack is a former Scottish Environment Minister and MSP for Edinburgh Central

A low carbon diet

The price of oil is only going one way: up. We literally cannot afford not to invest in renewables

Jeremy Leggett,
Thursday July 10, 2008

The UK government's renewables consultation called for a green revolution in energy. In doing so, it created a perfect tabloid rod for its own back. The proposed cost-to-consumer calculated by the Department of Business were based on the vanishingly unlikely prospect of an oil price as low as $70 a barrel in 2020. Expected additions to UK energy bills, at that oil price, would be 10-13% for electricity and 18-37% for gas, the government said.
Cue outrage. The tabloid press the next morning was full of angry headlines about inflating British energy bills. "Going green will mean five years of rising bills," trumpeted the Daily Express. The adjacent headline read: "Fuel fears: Budget drove my dad of 92 to suicide." The Daily Mail was more specific: "Price of turning green: Labour's wind farm plan will cost every family £260 a year". Neither they nor other similar articles in other tabloid papers mentioned the economic imperative of abating climate change.
Out-of-control climate change is going to land us all with bills that will make today's energy bills look like pocket money. Nobody at all, that I saw, picked up the significance of the oil price, and peak oil, in the size of energy bills. Peak oil is going to send the oil price, high as it is today, through the roof. Gas and coal will go with it. Simply stated, fuel bills will be far higher if we stay with the status quo than if we go for a green renewables revolution.
The government did note that at $150 a barrel for oil 12 years from now, instead of $70, UK energy bills would be 35-40% lower than the figures that outraged the tabloids. But how much lower will they be at $200, $300, $400 and more for a barrel of oil?
On the same day the consultation was released, Gazprom boss Sergei Miller told the FT that OPEC has no control over world oil price and many countries are near peak oil. Prices are heading for "a radically new level" via $250 next year, he believes. As I constantly point out in these blogs, more and more people in and around the oil and gas industry are saying this kind of thing.
Perhaps oil traders are beginning to believe the forecasts of this kind. On the day the consultation was released, oil topped $140 for first time and shares plunged. Reflecting this and other woes, the Dow Jones hit its lowest level since 2006.
Proctor & Gamble gave us a clue, on the same day, as to how far-reaching the response to ever higher oil prices will be in the prescient quarters of the business world. P&G will shift to factories close to customers in order to cut its fuel bills, head of global supply Keith Harrison said. P&G have over 145 manufacturing plants in 80 countries supplying 3.5bn consumers. Their problems are about the cost of powering plants and well as the cost of having 30,000 trucks on the roads every day. By the end of 2009, half the electricity at a P&G nappy plant in Pennsylvania will come from onsite wind power, for example, and other renewables are being trialed, including of course solar. (Cue cynics: an opportunity to suggest once again that selling solar is surely all I care about in airing concerns about climate change and peak oil).
When are people going to get it? Within just a few years, peak oil is going to make them wish desperately that they had invested in renewables and efficiency today, or had a government willing to do so seriously on their behalf. There is no better way to avoid the inevitability of traditional energy-price inflation.

Rolls-Royce and BA to test for greener fuel

Mark Milner, industrial editor
The Guardian,
Friday July 11, 2008

Rolls-Royce and British Airways are teaming up to conduct an in-depth study of using alternative fuels in the aviation industry.
The initiative comes as the industry faces escalating fuel costs and growing pressure to curb emission levels highlighted by caps on aircraft emissions through the European Union's emissions trading scheme.
The companies are asking alternative fuel providers to submit samples for testing and will then draw up a shortlist of up to four to test on a Rolls-Royce RB211 engine from a BA Boeing 747.
Suppliers who reach the short list will have to provide 60,000 litres of fuel and will have to demonstrate what Rolls-Royce described as their fuels' "sustainability, suitability and industrial capacity".
"It is critical that the fuel cannot only do the job required of it, but can also offer a CO2 benefit and be produced without a detrimental impact to food, land or water," Rolls-Royce director of research and technology, Ric Parker, said. "There must also be clear evidence of the potential for mass production and global distribution of an alternative fuel to support the world's aviation industry."
A number of alternative fuels are already being tested by being used to power individual engines on aircraft. But Rolls-Royce argues that the use of an indoor test bed will allow more accurate data to be gathered than would be possible from actual flight data.
Kerosene is the current fuel of choice. It is widely available and can tolerate a wide range of temperatures, but the industry is seeking alternatives that will cut carbon emissions.
Jonathon Counsell, head of environment at BA, said: "Should the tests we are undertaking with Rolls-Royce be successful, the potential for bringing us closer to a greener fuel alternative that will help the aviation industry reduce its carbon footprint is enormous."

Biofuels called a major cause of soaring food prices

By Lesley Wroughton Reuters
Published: July 10, 2008

WASHINGTON: A leading World Bank economist's claims that biofuels are a major cause of soaring world food prices could further undermine support for the alternative fuel worldwide and cause tensions with the White House, which fervently supports the new industry.
The draft report by the World Bank's top agricultural economist, Don Mitchell, estimates that the growing use of food for fuel, combined with low grain stocks, market speculation and export food bans, contributed as much as 75 percent of the 140 percent rise in prices between January 2002 and February 2008.
The remainder of the increase is due to a weakening U.S. dollar, higher energy prices and related increases in fertilizer costs, he said.
"Increased biofuel production has increased the demand for food crops and been the major cause of the increase in food prices," said Mitchell, who is widely respected for his work on agricultural policies and production.
Mitchell's preliminary finding of 75 percent has sparked a heated debate because it goes beyond most other estimates.

So far, estimates have ranged between 2 percent and 3 percent, by the Bush administration, and up to 30 percent by the UN Food and Agriculture Organization.
There is growing concern that the U.S. ethanol industry is a big part of food inflation, with the sector on tap to buy up to one-third of the U.S. corn crop - a grain normally used for food and livestock feed.
According to Mitchell, growing biofuel production is the main reason for the increase in food prices.
He said export bans and speculative activity increased as a result of rising prices and would not have occurred without higher costs. Also, higher energy and fertilizer prices would have increased crop output costs by about 15 percent in the United States and by less in other countries with less-intensive production practices.
Moreover, successive droughts that ravaged wheat crops last year in Australia would not have had a large impact because they reduced global grain exports by just 4 percent and other exporters would have been able to offset those losses.
"Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," he said.
Still, Mitchell's thinking is not far off that of colleagues at the International Monetary Fund, who recently concluded that a "significant part of the latest jump in food prices can be traced directly to biofuels policy."
Concerned that rising food prices have increased poverty and hunger, the report is part of a effort at the World Bank to find a more accurate picture of the role biofuels are playing in the rise of food prices.
It has also thrust the development agency, which considers itself a neutral voice on global issues, into an intensely political debate.
The Renewable Fuels Association, a trade group for the ethanol industry, argues that it is a stretch to put 75 percent of the blame for rising food prices on biofuels.
Joe Jobe, the chief executive of the National Biodiesel Board, said the addition of biofuels to the U.S. energy supply was the only thing keeping prices from rising even more quickly.
"Credible fact-based research has demonstrated repeatedly that soaring petroleum costs are the main culprit behind higher food prices," Jobe said.
Kimberly Elliott, a senior fellow at the Center for Global Development in Washington, said the debate around biofuels should not be about numbers but should focus on the broader issue of whether current biofuel policies work or not.
"It doesn't really matter if biofuels' contribution to the food price crisis is large or small because promotion of the current generation of biofuels doesn't make any sense anyway," Elliot said. "It is premised on energy security and mitigating global warming, and it's not achieving either of those things. Also, new scientific research on the global warming front suggests it is actually making things worse because of the land use changes," she added.
The World Bank has denied media reports that Mitchell's document was withheld because of political pressure from the Bush administration, which has increased incentives and mandates for alternative fuels made from food crops.
The bank said Mitchell's report was part of research for its World Development Report 2008 released in April and is not the official view of the bank. A final version of the paper is expected to be released this week.

Enel plans €500m wind farm off the Italian coast

By Guy Dinmore in Rome and Fiona Harvey in London
Published: July 11 2008 03:00

Enel, Italy's power utility, has committed to a €500m ($789m) joint venture to build Italy's first offshore wind farm, involving the construction of 115 turbines off the southern coast of Sicily.
The project, whose design was submitted to the Italian government yesterday, aims to become operational by 2012 and is competing to become the Mediterranean's first wind farm.
There are two other projects planned in the Mediterranean but they have not yet entered the construction phase.
If approved, the Sicilian wind farm could meet the electricity needs of 390,000 households and avoid carbon dioxide emissions of 815,000 tonnes a year, according to Enel. The project should have capacity of 345 to 575 megawatts.
The offshore wind sector suffered a high-profile setback in May when Royal Dutch Shell pulled out of the London Array, the world's biggest proposed offshore project, citing cost reasons.
Enel's move was the second vote of confidence this week in offshore wind power in Europe. Blackstone, the US buy-out group, on Tuesday announced plans to invest €1bn in a network of about 80 wind turbines off the north German coast.
Mortimer Menzel, partner at Augusta & Co merchant bank, called the Blackstone deal "a very good sign" for Europe's offshore wind business. "It's good [for the industry] that a serious professional investor is giving this sort of importance to offshore," he said.
Shell is in talks to sell its stake in the London Array to its partners in the project, Dong Energy of Denmark and Eon, the German utility.
Offshore wind farms are more costly and difficult to build than onshore turbines, as they require more robust equipment and more frequent maintenance. There is also a shortage of the vessels needed to install them.
Enel has a 57 per cent stake in the Sicilian venture and Moncada Costruzioni, a Sicilian company, 43 per cent. The turbines, anchored to the seabed at a depth of 30m, will be more than 100m tall and have rotors with a diameter of more than 110m. They will be sited in the Gulf of Gela, about three nautical miles off Sicily.
Enel has come under criticism from environmentalists for its plans to increase construction of coal-fired power stations in Italy, increasing CO 2 emissions. Local opposition has also prevented the construction of onshore wind farms in Italy.
Fulvio Conti, chief executive of Enel, said the project would double Enel's installed capacity in the wind sector. He said Enel's emissions-free generation already represented about 30 per cent of its total domestic electricity production. Coal also accounts for 30 per cent.
Enel's target is to have about 1,500MW generated by wind power by 2012. By the end of last year wind accounted for 325MW.
Enel said it planned investments of €7.4bn by 2012 in renewables. Last month it bought wind farms in France expected to produce 120MW.
Wind farms have been achieving high valuations in the past year, prompting some analysts to suggest the market is peaking. Earlier this year Scottish and Southern Energy bought Airtricity, the Irish wind farm developer, for €1.45bn.
Copyright The Financial Times Limited 2008

One third of coral species face extinction

By Roger Highfield, Science Editor
Last Updated: 7:01pm BST 10/07/2008

One third of the major reef-building coral species are vulnerable to extinction, and the pace of destruction is increasing so it is conceivable that the "rainforests of the ocean" could be wiped out this century.

The warning that coral communities are faring even worse than their terrestrial counterparts, notably tropical rainforests, is given by an international team led by Prof Kent Carpenter, Director of the Global Marine Species Assessment Of Conservation International And The International Union For Conservation Of Nature, IUCN.

The loss of reefs will expose costal communities to greater storm surges
Built over millions of years, coral reefs are home to more than 25 percent of marine species, making them the most biologically diverse of marine ecosystems.
The loss of reefs could have huge economic effects on food security for around 500 million people who are dependent on reef fish for food and/or their livelihoods and tourism is also likely to suffer.
"The results of this study are very disconcerting," said Prof Carpenter, lead author of the Science article.
"When corals die off, so do the other plants and animals that depend on coral reefs for food and shelter, and this can lead to the collapse of entire ecosystems."
"Whether corals actually go extinct this century will depend on the continued severity of climate change, extent of other environmental disturbances, and the ability of corals to adapt," the article concludes.
"Our results emphasize the widespread plight of coral reefs and the urgent need to enact conservation measures."
Researchers identified the main threats to corals as climate change and local stresses resulting from destructive fishing, declining water quality from pollution, and the degradation of coastal habitats.
Climate change causes rising water temperatures and more intense solar radiation, which lead to coral bleaching and disease often resulting in mass coral mortality. Bleaching happens when the water temperature rises to the point where it kills the tiny polyps that make up the coral, leaving behind the white limestone skeleton of the reef.
With colleagues, Prof Carpenter has compiled data for over 700 coral species and classified their conservation status according to the IUCN "Red List" Categories and Criteria. Their analysis indicates that, of 704 species, 231 are in the "Critically Endangered," "Endangered," or "Vulnerable" categories.
The results also indicate the extinction risk of corals has increased over the past decade. Before the massive bleaching events of 1998, which wiped out around 16 per cent of reefs, only 13 species would have been included in the three threatened categories based on the data available today. The vast majority - 671 - would have been categorised as of "least concern."
The Caribbean has the largest proportion of corals in high extinction risk categories, with notable declines of staghorn and elkhorn corals, while the Coral Triangle (Indo-Malay-Philippine Archipelago, western Pacific) has the highest proportion of species in all categories of elevated extinction risk, notably as a result of warming.
Corals in oceanic islands of the Pacific generally have the lowest proportion of threatened species and Hawaiian reefs have been spared extensive coral loss from bleaching or disease. However, it hosts several rare species may prove especially vulnerable to future threats. Corals from the genera (group of species) Favia and Porites were found to be the least threatened due to their relatively higher resistance to bleaching and disease.
Marine researchers at the International Coral Research Symposium (ICRS) in Fort Lauderdale, Florida, this week are exploring the longer term consequences of widespread loss of corals due to global warming and ocean acidification.
Chair of the Climate Change session, Prof Ove Hoegh-Guldberg of the ARC Centre of Excellence for Coral Reef Studies and University of Queensland, said: "The evidence suggests reef systems are becoming more brittle, as a result of bleaching, disease and the effects of acidifying water - and this means we are likely to see more moonscape-like areas where reefs once used to be. This will be accompanied by a switch from the spectacularly colourful fish that people normally associate with reefs to much fewer and plainer ones."
"The loss of reefs will also expose coastal communities, already facing rising sea levels, to a greater risk from storm surges and tsunamis - as reefs currently provide a protective barrier against these," he said.
"This will be accompanied by murkier, less productive waters as water quality suffers." Researchers have found evidence that the rate at which coral reefs have been deteriorating and disappearing has accelerated in the last five years.
"For the past 30 years the loss has been between 1-2 per cent of the world’s coral per year," he said. "The latest data suggests the rate is now around 2 per cent a year. This doesn’t give us much time."
Emerging evidence indicates some corals have suffered a 20 per cent reduction in their growth rates, which researchers consider to be due to the rising acidification of sea water making it harder for them to build their chalky skeletons.
"This apparent drop in calcification is bound to be a real issue for discussion at the symposium," he said.
Most disturbing of all were recent claims by some atmospheric researchers that the level of carbon dioxide has been underestimated, and may be closer to 410 parts per million, than to the 385 estimated by the Intergovernmental Panel on Climate Change (IPCC).
"If we continue on the pathway that we are on right now, we get to levels where you are looking at the total loss of reef structures worldwide. Under those conditions you just don’t have corals - no corals, and you also lose 50% of the fish and other species that live in and around corals," he said.
"We either reduce our carbon dioxide emission now or many corals will be lost forever," says Julia Marton-Lefèvre, IUCN Director General.
"Improving water quality, global education and the adequate funding of local conservation practices also are essential to protect the foundation of beautiful and valuable coral reef ecosystems."

Gordon Brown refuses to apologise over road tax fiasco

By James Kirkup, Political Correspondent
Last Updated: 1:01pm BST 10/07/2008

Gordon Brown has rejected demands to apologise to MPs amid accusations from the Conservatives that he misled Parliament over Treasury moves to increase road tax for millions of motorists.

The Treasury admitted on Wednesday that more than 9 million motorists will be hit with significant rises in Vehicle Excise Duty (VED) as part of a "green tax" package that will come into effect next year.

The higher tax rates will raise an extra £430 million for the Treasury next year and £700 million the year after
Many drivers will see their tax rise by more than £200 a year as a result of the plans.The Treasury figures showed that in 2010/11 when the full tax measures are in place, 43 per cent of motorists will be worse off and 18 per cent will gain from lower tax rates.Last month in the House of Commons, the Prime Minister told David Cameron, the Tory leader, that if he looked at the VED plan, "he will see that the majority of drivers will benefit from it." The Tories say that means Mr Brown misled MPs.
In the Commons today, the Tory leader challenged the Prime Minister on his comment.
"Why doesn't he scrap his retrospective VED tax hike for next year. Will he at least admit that when he told me that a majority of drivers would benefit, he was wrong?" Mr Cameron asked.
"Will he now correct himself and apologise to the House for getting it wrong?"

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Mr Brown initially ignored Mr Cameron's demand, but was later forced to reply by another question.
He said: "I have spoken to this House on this matter on a number of occasions. Our policy is fair to those people who have the least polluting cars."
He also pointed out that during the June exchange, Mr Cameron had accepted that Mr Brown had meant to say that the majority of drivers would gain or be no worse off.
Government insiders now fear that the scale of the tax rises due next year could reignite a dangerous Labour rebellion over road tax.
Alistair Darling, the Chancellor, last week averted a Commons revolt by promising angry Labour MPs that he will look again at the reforms in the autumn.
However, some ministers now fear the rebellion could resume and believe Mr Darling must publicly ditch the scheme before the autumn.
"These figures demonstrate why this is a policy that has to change," said Martin Salter, a Labour MP.
"It is right and proper to provide incentives for green choices in motoring. But the whole scheme needs restructuring to allow people a much longer time frame in order to switch to low emissions vehicles."
Currently, vehicles registered between March 2001 and March 2006 cost a maximum of £210 for a year's road tax.
But from April 2010, that rate will rise to £455 for the most polluting cars - a £245 rise.
Cars such as Jaguars, Range Rovers and even some people carriers emitting more than 255g of CO2 per kilometre will pay up to £440. Other cars with smaller engines will face a £100 rise.
The plans - against which The Daily Telegraph has campaigned - are especially controversial because they are effectively back-dated, applying to cars that are already on the road.
Sheila Rainger of the RAC said: "It is shocking that the Treasury has taken so long to acknowledge the full impact of these budget changes. Nine million motorists will be worse off under the new scheme. Drivers of very modest cars will be hit by increases, which, added to soaring fuel prices, will plunge family budgets into the red.
"Far from being a green tax, this scheme will take £1.2 billion off the motorist and put it in the Treasury's coffers."
Treasury figures slipped out in a parliamentary answer show that of the 21.9 million cars that will be on British roads by 2010/11, 43 per cent - or 9.4 million - will pay higher VED in real terms than they do now.
Another 39 per cent - 8.4 million - will be left no better off. Just 18 per cent - 4.1 million - will actually benefit.
Of the 9.4 million who will be worse off, 1.18 million motorists will be dragged into the highest two tax bands, where the annual cost is upwards of £400.
The higher tax rates will raise an extra £430 million for the Treasury next year and £700 million the year after.

Green taxes 'will not bring substantial funds'

By Rosa Prince, Political Correspondent
Last Updated: 6:01pm BST 10/07/2008

The introduction of green taxes such as bin charges and flight levies will not bring substantial extra funds to the Exchequer, an influential think tank has warned.
Nine million face 'green' road tax increases
Gordon Brown accused of misleading parliament over road tax rises
While switching the emphasis of the taxation system may see environmental benefits, a report for the Institute for Fiscal Studies said ministers would be disappointed if they anticipated significant additional revenue as well.

The most economically efficient forms of green taxation, such as carbon trading, could be expected to bring in around £13 billion a year, but the report's authors warned that the actual revenue gain to the Treasury would be well under one per cent of GDP.
Robert Chote, director of the IFS, said: "A significant 'green switch' in taxation has great rhetorical appeal, but this study suggests that enthusiasts often overestimate the available revenues and claim a 'double dividend' of improved environmental and economic performance that may not exist.
"Perhaps of greater concern to the politicians is the fear that they would be punished by the voters for increasing green taxes without being given much credit for reducing other ones."
The authors suggested that measures which penalise those who damage the environment should be accompanied by a corresponding tax cut - such as funding a reduction in fuel duty with a pay-as-you-drive road pricing scheme.
They were critical of bin taxes, saying that charging for household waste was likely to produce "only modest potential welfare gains... at the risk of increased dumping and other avoidance".
The report, Environmental Taxes, was prepared by academics Don Fullerton, from the University of Texas, and Andrew Leicester and Stephen Smith of University College London as a submission to a wider review of the UK tax system by Sir James Mirrlees, the Nobel laureate, due to be published by the IFS early next year. In it, they call on politicians of all parties to base their appeal for more green policies on the environmental benefits, not the potential for cuts elsewhere in the tax system.

Battle against Toad's road rage

Michael White
The Guardian,
Friday July 11, 2008

Sales of gas-guzzling cars have collapsed in North America and are dropping fast in Britain. But it is market forces, oil at $140 a barrel, which is finally curbing the motorist's appetite for expensive driving, not the government's green tax changes. That does not mean there is nothing for governments to do, only that it is difficult to fight tabloid road rage. Nudging, not bullying, is the fashionable verb of the moment, coined by two American academics and already purloined by Barack Obama and David Cameron. Cameron and his shadow chancellor, George Osborne, are keen to nudge us all towards greener behaviour.
But how? Osborne made a speech to the Green Alliance this week in which he ticked several boxes: a better carbon trading system which would auction permits, not give them away; a carbon levy instead of the flawed climate change levy which does not reflect actual emissions; better incentives to develop green technologies, potentially huge global industries.
Politics being a body-contact sport, the Tory twins also want to beat the government. Labour's approach "gives green taxes a bad name", they say, because it is poor at changing habits or cutting pollution, much better at raising revenue for the Brown-Darling Treasury. No wonder voters resist the green agenda, especially now that times are harder.
At this point the high-minded Tory agenda collides with the motoring lobby's eternal demand for cheaper motoring: the rightwing press is always happy to play Mr Toad behind the wheel. Labour MPs with marginal seats join in. They saw what the Tories "Grand Theft Auto" leaflet on soaring motoring costs did at the Crewe byelection.
The result: a deft campaign from Mr Osborne which urges Alistair Darling to postpone the scheduled 2p increase in petrol tax and abandon his budget proposal for a sharp rise in vehicle excise duty (VED) on both new gas guzzlers and - more important - on older, more polluting cars sold since 2001. Some green campaigners are irritated too. Labour has been clumsy on green taxes, prone to "grand gestures followed by cave-in".
Darling's March budget also failed to make the VED change clear, whereas good green policy needs transparency, "carrots and sticks, but also tambourines," the energy specialist, Andrew Warren, told an audience this week. The tambourine is the bit on the tax bill which explains why saving energy - or garden waste - can save you money.
Ministers have mishandled VED and may be forced to retreat. But much of the row is phoney. Gordon Brown's "misleading" remark to MPs that a "majority" of motorists will benefit from the 2009-10 VED change was an error.
But Cameron's own reply to the slip stated the position correctly, as Brown had on a previous occasion: a majority will benefit or be unaffected. Few will pay the extra £245. But Britain cannot go on postponing climate change pain every time it starts to hurt.