photo credit : jo


Carbon Underground : Stealth Tax
by Jo Abbess
7th March 2008

The British Government are finding it hard to come out and say it. But they can't go on holding their tongues forever.

We need effective Carbon Control legislation : rules and regulations are the only way to seriously bite into Climate Change.

It's no good relying on hide-and-seek rearguard coverage protection, boys (and the overwhelming majority of you are boys), you have to start pushing forward and lead from the front.

You cannot go on expecting to hold your policies on Energy and Climate Change together with sticky plastic tape. You cannot say yes to action on Climate Change and still appease the big players in the Energy and Financial sectors.

You can hide for now, but not for long.

Part of the Government are persuaded of the need to use Tax to battle Carbon, but obviously, it's a poll-loser to mention the "T" word, and really edgy to try to make it core policy.

Another section of the Government understand the economy-stabilising logic of Carbon Quotas, but they'll never overcome the 1984, Big Brother, Animal Farm, totalitarian impression that Carbon Monitoring and Carbon Rationing evoke.

So they're pursuing Carbon Control by the means of stealth and side-effect. At first glance you could be forgiven for not seeing it, but that's what is happening.

DE FACTO CARBON TAX

The international markets are responding to heightened demand and energy security fears. It appears that Peak Crude is already with us in all its economy-deadening reality.

Yesterday the price went over $105 a barrel of oil, and that's a real hike, even given that the American Dollar currency is in freefall.

There is clearly a kind of uncodified, unreported agreeement in the constant dance between the Oil Exporting countries/companies and the Oil Importing countries/companies : "Don't Mention The War !" Don't mention that the sand is shifting beneath your feet, that you are being sucked into a quicksand quagmire.

Governments and Business know that their abilities to control the price of the basic commodity, refined petroleum oil, are waning.

Since Energy is highly "marketised", there is little "incentivisation" to do green energy investment, unless it's in response to regional policies, such as the European Biofuel Directive (2003).

Big Energy is getting fat on rising prices. What care they to go green ? It's not their function to speculate with green energy investment.

Governments are not going to re-nationalise Energy in order to build the new infrastructure required for green energy. They've taken Carbon off the accounting books, apart from the continued subsidies they make to keep Big Oil ticking over.

Electricity and Gas Energy Corporates have responded to measures such as the European Emission Trading Scheme (ETS), and calls for new green infrastructure spending under the European Renewables Directive (2001), by raising utility prices.

They claim their hands are tied because of rising wholesale prices, and of course, they are legally bound to try to stay afloat financially.

The big picture is : we have a Carbon Tax in operation.

DE FACTO CARBON ALLOWANCE

Fuel Poverty policy dictates support for the financially impoverished, who are also Carbon Poor, as Carbon Emissions are highly correlated to income.

Those with widening gaps between disposable income and utility energy expenditure are already getting handouts, as befits our social security system.

And now the Big Energy companies have been called to Government HQ for a dressing down from Gordon Brown for their opportunistic price rises, and threatened with a windfall tax.

There is talk of potentially issuing fuel and home energy tokens, effectively a free Carbon Ration.

The same idea has been promoted by the Cap and Share campaign from FEASTA, the Irish/British think tank, seeking to implement a vehicle fuel ration in Ireland, via a compensatory measure of issuing free Carbon Allowance certificates that can be traded, when capping of fuel is introduced.

And in British Columbia, the recent announcement for a Carbon Tax included legislation for issuing an allowance to citizens to compensate for projected utility bill increases - an "energy tax windfall".

The big picture is, this is paving the way to a universal Carbon Allowance system.

The problem with relying on Stealth Taxes or Stealth Rationing is that is it not to be known how long these measures will take to be effective in any significant way.

Taxes are unpopular with the electorate. A tax on individuals and their personal household consumption is quite a radically vote-losing idea.

Taxing Energy companies on Carbons means the cost is pushed down the food chain, the Carbon Chain to customers, effectively a blanket Carbon Tax, on end consumers.

Just like VAT, the poor householder pays. Having a testbed in the ETS showed that "virtual" costs are loaded onto bills, even before Energy corporates will actually have to pay for Carbon Allowances.

There is of course the obvious bleed and creep from a blanket price increase in energy.

The looping effect of oil price inflation into the general economy, particularly through other commodities is already showing. It's called inflation. It's basically equivalent to a Carbon Tax.

It's not easy to replace petroleum overnight, it's the main road transport energy. You need to replace all the vehicles to take another fuel before you can stop relying on refined petroleum.

Technologies such as Coal-To-Liquid (CTL) and Gas-To-Liquid (GTL) cannot scale up very quickly.

European Commissioners and other elected and non-elected European high-ups are musing about where the oil price could go.

Andris Piebalgs says $200 dollars a barrel by 2011 cannot be ruled out.

People don't want to be taxed. Corporates want to know exactly how much Carbon will cost so that they can budget and invest. This is a real conflict of interests.

It's a large quandry. Markets probably can't fix this. A Carbon Tax, of its own, cannot possibly sort all the problems.

It's time to stop looking at putting a price on Carbon, and start considering Carbon as a currency in its own right, one that can be traded to a certain extent, but a currency that must develop less currency, tending to zero, in the near- to medium-term.

CARBON GAMBIT

There's a Budget coming up in the United Kingdom on 12th March.

A chance to pierce the gloom, wipe away the cobwebs, and start talking clearly about the Carbon Roadmap.

Which way is the cookie going to crumble ? Which side of the parting will the coiffure fall ? You can't cover the bald patch forever. Why not be more open about it ? You're going to price Carbon. Or you're going to ration Carbon. Or you're going to offer a mix-and-match approach.

Tell us the measures you are going to implement to control Carbon, Mr Chancellor of the Exchequer. And while you're at it, tell us how you're going to make sure we have renewable and sustainable energy, going forward.

You can use words like "world-class" (a la Malcolm Wicks), or "good for British business", or the "need for competitiveness", or "green collar jobs" (a la Hillary Clinton), but you do need to speak to Carbon. And do it openly and comprehensively.


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