A new report produced by conservative thinktank Policy Exchange – described as[1] David Cameron’s “favourite”, promotes[2]upstream carbon taxes as more effective than market-based cap & trade in reducing emissions.

The report “Greener, Cheaper”[3], by Oxford based academic Dieter Helm[4], proposes an upstream fuel tax “levied on coal, gas and oil weighted according to their carbon content. Such a tax has a number of advantages. It captures all the fossil fuel carbon emissions (including aviation and shipping if these are incorporated within the tax base); it is relatively easy to target, based upon a price per tonne of each fuel; the administrative costs are low; the tax base is wide so proportionately it can raise a lot of revenue”.

At first glance, the “upstream fuel tax” proposed would appear to be a tax applied at the wellhead – the site of extraction. While not sufficient to avoid catastrophic climate change – which requires an end to fossil fuel extraction – it would be more targeted than many alternatives proposed. However, reading the report in more detail, it seems that Helm is proposing a tax on fossil fuels consumed, not extracted. Helm does recognise the current inequity in blaming China for emissions resulting from industrial production of goods eventually consumed in Europe and the US.

The report makes significantly better recommendations than we’d expect from conservative think tanks, with certain interesting arguments. But it is still aways from addressing the urgency of a rapid – immediate – shift from fossil fuels to renewables.

Meanwhile, new research[5] released by PLATFORM finds that transforming the Royal Bank of Scotland into the Green Investment Bank would kick start the green energy revolution. The research, by former Pricewaterhouse Coopers consultant, James Leaton, finds that it would bring 50, 000 new green jobs a year, increase efficiency, reduce the UK’s carbon emissions and improve international competitiveness – whilst not increasing the budget deficit.

Endnotes:
  1. described as: http://en.wikipedia.org/wiki/Policy_Exchange
  2. promotes: http://www.ft.com/cms/s/0/5f30d454-9e54-11df-a5a4-00144feab49a.html
  3. “Greener, Cheaper”: http://www.dieterhelm.co.uk/sites/default/files/PX_Greener_Cheaper_Jul10.pdf
  4. Dieter Helm: http://www.dieterhelm.co.uk/
  5. new research: https://www.platformlondon.org/carbonweb/documents/bankfuture.pdf