Hedegaard says now is not the time for carbon tax

But carbon levy 'could come later' says candidate for future EU climate commissioner role.
Tom Young for BusinessGreen, part of the Guardian Environment Network
guardian.co.uk, Monday 18 January 2010 10.42 GMT

The debate surrounding the relative merits of carbon taxes and emissions trading schemes heated up today after Connie Hedegaard, leading nominee for EU climate commissioner and the chair of last year's Copenhagen Summit, rejected calls for the introduction of a carbon levy.
However, she did not rule out the idea of a carbon tax completely, raising the possibility that an EU charge on carbon emissions could be introduced at a later date.
"It would be wrong timing at this stage to turn to the tax tool," Hedegaard told the European Parliament, before adding that "it could come later".
The EU already has a cap-and-trade scheme in the form of its Emissions Trading Scheme (ETS), but green groups have consistently criticised the scheme, arguing that the cap on emissions is too high and as a result the price of carbon has not risen to a level where it will spur investment in renewable energy.
The US, Japan, and Australia are all proposing to emulate the EU and introduce their own cap-and-trade scheme. However, the model is facing growing opposition with a number of economists and businesses arguing that a carbon tax would prove both simpler and more effective at curbing carbon emissions.
The UK's independent Committee on Climate Change last year advised the government to intervene in the ETS and introduce a hybrid model that would effectively impose a floor price on carbon, while a number of energy firms have also argued that they need a set carbon price in order to justify future clean tech investments.
Meanwhile, one of the most vocal advocates of a carbon tax, head of the NASA Goddard Institute for Space Studies James Hansen, this week stepped up his campaign against US proposals for a cap-and-trade scheme, issuing an open letter to the head of a carbon trading summit in New York, arguing that cap-and-trade schemes represent a "path focused on corporate greed".
Instead, Hansen advocates a form of carbon tax known as a fee-and-dividend approach. Under this model, a gradually rising carbon fee would be collected at source for each fossil fuel. The money raised from the fee would then be passed on to consumers to help them cope with rising energy and fuel prices. It is envisaged that those who chose less carbon-intensive goods and services would make money from the scheme by receiving more through the dividend than they would have to pay in increased energy and fuel bills.
Hansen says in his letter that fee-and-dividend represents a "transparent, honest approach that benefits the public", arguing that in contrast cap-and-trade imposes "a hidden tax … because cap-and-trade increases the cost of energy for the public, as utilities and other industries purchase the right to pollute with one hand, adding it to fuel prices, while with the other hand they take back most of the permit revenues from the government".
Meanwhile, Hedegaard told today's hearing of MEPs that she could support calls for tougher vehicle emission standards.
The EU already has standards in place that require manufacturers to cut emissions from new cars by around 15 per cent by 2015, but Hedegaard said there could be a case for more demanding targets.
"It can be important to try and review - did we go far enough at the time? Because this is a field where technology is really moving very fast," she said. "Often we've seen industry will protest and say it's going to be extremely difficult, in fact it's almost impossible. But then it turns out that when we do these things, we can often do it quicker than assessed before, and claimed before, and they can do it even more ambitiously."
She added that if as expected her nomination is approved she would aim to introduce measures to cut emissions from road freight.
"We still have not done what the EU should do on lorries," she said. "There will come an initiative on lorries, that will be one of the first things."