Double whammy: carbon tax to save the planet and to chip away at UK’s national debt

Carbon Tax

Rishi Sunak, the UK Chancellor, is preparing to instigate a carbon tax in the UK to raise billions of pounds after we complete Brexit negotiations and leave the EU at the end of the year. The idea is to raise money to chip away at the enormous amount of national debt that has been accrued because of the coronavirus pandemic to pay for schemes such as furlough and business loans (actually grants). Also, Sunak wants to press for net-zero emissions by 2050. It’s a double whammy-type policy which meets two objectives.

Carbon Tax

Carbon tax by LH Brown 2018.

Currently the U.K. is under existing EU carbon-reduction schemes. However, when the UK is entirely independent of the EU the UK government will have the freedom to instigate fresh policies to protect the climate. This in turn, protects people and animals. Some environmentalists are concerned because a tax on carbon emissions is a bit like fuel duty and fuel duty is a flexible concept subject to political pressure. Under these circumstances, they can see a tax on carbon emissions becoming elastic and the objective of net-zero emissions being unmet.

The new tax would give companies a tax emission allowance which could fall over time. If they are above the allowance they would be charged for every tonne of carbon produced. The schemes would be simple to operate but they would have to be agreed as part of the Brexit trade negotiations currently taking place.

Michel Barnier, the EU’s negotiator on Brexit, believes that there is a lack of progress in respect of talks on climate commitments on carbon pricing. The government wants greater commitment and a fresh attitude from consumers and businesses to decarbonise the nation.

It is believed that £27 billion could be raised with a carbon tax of £75 per tonne of CO2 emitted by 2030, charged on greenhouse gas producers. Critics say that a carbon tax alone is not enough and that there needs to be a coherent strategy in order to avoid such a tax being scrapped in the future.