This position paper is a response to a European Commission consultation call whose deadline was October 14th. The consultation call begins as follows:
“To deliver the European Green Deal, there is a need to rethink policies for clean energy supply across the economy, industry, production and consumption, large-scale infrastructure, transport, food and agriculture, construction, taxation and social benefits. Well-designed taxes play a direct role by sending the right price signals and providing the right incentives for sustainable practices of producers, users and consumers. The revision of the Energy Taxation Directive is an integral part of the European Green Deal and should be focused on environmental issues.”
Download the position paper (pdf, 1 MB)
Summary
Decarbonisation by 2050 within the EU and elsewhere is clearly of vital importance, but will be a delicate balancing act because of the high dependency of the economy, particularly the transport sector, on oil. The transport sector will need to be thoroughly reconfigured, not just in terms of a switch in energy input and modes of transport, but also in terms of average speed and the amount of kilometres covered.
This will require a comprehensive examination of overall EU economic policy and a much more agnostic attitude to economic growth.
During the energy transition period, any change in energy price will need to be closely monitored to ensure that it does not trigger an economic crash, and a maximum carbon tax or fee will probably need to be imposed. The elimination of fossil fuel subsidies will also need to be carefully monitored.
To ensure that decarbonisation does take place despite the need to limit a carbon fee, and that fossil fuel subsidies become redundant, we propose that the ETS should be extended and reconfigured so that it limits, and gradually phases out, the production and import of fossil fuel. We believe that this would be relatively easy to administer in practical terms and it would reduce the chances of decarbonisation being sabotaged by wealthy individuals who would not be affected by a carbon price. A quota system may need to be introduced, to ensure that everyone, rather than the wealthy alone, has access to some fossil fuel while its supply is gradually eliminated.
We recommend that the revenues yielded be allocated on a lump-sum per-capita basis. Additional levies on luxury uses of carbon could also be applied.
We also recommend extending the ETS to include a group of lower-income partner countries which, taken together, have a similar population to the EU, in order to promote international climate justice and to minimise the bureaucracy associated with the Carbon Border Adjustment Mechanism.
Summary points:
[1] Rebating all of most of the revenue raised by a carbon fee or tax to the EU’s population as per capita lump sum allocations appeals to equity/justice, making the policy more likely to be politically acceptable and even popular – exactly the opposite of the ‘Gilet Jaunes’ situation
[2] An upstream, supply-side approach to extending the ETS is the only way to address the climate emergency with anything like the requisite speed and scale
Download the position paper (pdf, 1 MB)
Note: This document is a slightly modified version of the one sent to the Commission; it has been edited to remove some duplicated text.
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