Now is the time to tackle carbon pricing, when the oil price collapse will sugar the pill
Britain’s last financial budget before polling day, announced on March 18, included the inevitable pre-election boondoggles. It also sent mixed messages on the environment.
A £1.3 billion cut in taxes to boost North Sea fossil fuel production after the halving in global oil prices predictably had climate change campaigners up in arms. Also included was funding (through complex contracts-for-difference in the electricity market) for a big new renewable energy project, the Swansea Bay tidal lagoon, along with a slew of smaller measures such as another increase in the landfill tax and a boost for ultra low emission vehicles.
Green window-dressing from a business-as-usual Chancellor, perhaps? Or, less cynically, just another example of the messy reality of transitioning from the old economy to a new and by no means yet certain green economy.
One week later came news of another knock-on from the oil price drop: the possible immediate collapse of Closed Loop Recycling, the UK’s principal food grade recycled plastic manufacturer. I visited the plant in Dagenham some years ago while a London Assembly member and am still in awe of the hi-tech machines that take a jumble of mixed plastic waste in at one end and produce pristine PET and HDPE at the other end, clean enough to eat off, literally.
However, with virgin plastic prices currently falling 20% or more a year, according to WRAP, the financial model is clearly under severe threat. In this instance at least, the circular economy risks rapidly switching to a straight line, downwards.
What can be done?
One option for public policy makers is to seize the opportunity of lower oil prices to make a start on introducing a carbon tax. The lesson from landfill is that taxes can make a big difference. That started out at £8 per tonne, climbing steadily to today’s £80, without the economic roof falling in. The ultimate impact has been transformative.
Earlier this year, The Economist newspaper highlighted a recent OECD study on the economic cost of environmental regulations. Straying from the publication’s usual party line, that surprisingly concluded “an increase in stringency of environmental policies does not harm productivity growth.”
What better time to bring in counter-cyclical measures against planet-threatening fossil fuels? Indeed, if not now, then when?