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A draft progressive carbon taxation policy motion

April 14, 2020 9:15 PM
By Stewart Reddaway

A progressive carbon taxation policy motion, including aviation, to reduce both CO2 and poverty
Draft 14 April 2020

This is a draft Carbon Tax + Dividend policy motion derived from the earlier leaflet text. I hope a final version gets enough support to be submitted to the LibDem Autumn Conference 2020
It is 930 words long, but still leaves some aspects not discussed. I have included a reference to seatguru.com for info about aircraft seating, but do not expect this to remain in the final version. I have ignored the current (short-term?) reductions in aviation and other emissions.
I will consider any feedback that reaches me.
stewart.reddaway@gmail.com


Conference notes that:
Raising the cost of carbon with a comprehensive carbon tax on all fossil fuels, collected at the point of production or import, uses market forces to reduce CO2 emissions in a very cost-effective and efficient way. Both energy efficiency and the use of low-CO2 energy are encouraged.

It applies to all sectors, including heating, industry, electricity generation and transport.

If the money raised (net of partial rebates and costs) is paid back as a dividend to all UK residents on an equal-per-head monthly basis, then people with a below average total carbon footprint (i.e. those for whom the dividend payments exceed the effect of price rises due to the tax) are subsidised by those with above average footprints. Children can be rated at half the adult rate.

Currently there is an international agreement not to tax fuel for aviation. A good proxy for a fuel tax is a flight tax based on take-off weight and distance flown.

Conference believes that:

Not taxing carbon is a bit like trying to reduce smoking without taxing cigarettes.

The tax should not be allowed to make poverty worse, for example by increasing home heating costs. The above dividend, which is a bit like a form of UBI (Universal Basic Income), achieves this by making the policy progressive. Although poor people may have high heating costs, their limited total spending power means their total carbon footprint is almost always below average, so they will be winners; as will almost all people in fuel poverty. Overall, poverty is reduced.

As the tax is mostly collected from big companies on goods that are already monitored, and the dividend rate is the same for everyone, administrative costs should be low. The dividend makes the policy tax-neutral overall, which helps sell it politically. It is also technology-neutral, as it does not try to "pick winners".

The policy covers all CO2, and at a published price, whereas the current EU ETS (Emissions Trading System) covers only about half of emissions, and at an un-predictable price.

The tax should rise progressively, perhaps to £200 per tonne of CO2 over about 10 years. Depending on total carbon emissions at that date, this might produce a dividend of about £1300 per adult per year. If possible, tax rates for several years ahead should be published so investors and others can plan with confidence.

To keep a level playing field, the policy would have to be negotiated internationally, at least with the EU. (But as CO2 reduction is urgent, it could start unilaterally.)

The tax should be refunded for CO2 saved by Carbon Capture and Storage. Carbon-intensive industries should be discouraged from migrating abroad by giving them technical help and/or partial rebates.

Consideration should be given to the problem of goods imported with significant carbon embedded during manufacture. Although not emitted in the UK, these substantial emissions are our moral responsibility. Assessing goods individually for embedded carbon is too difficult, but countries with a poor record on climate change, such as not living up to their Paris commitments, might have higher tariffs imposed on them. Wide international agreement would be highly desirable.

Taxing CO2 is more effective than some other aviation taxes. A frequent flyer tax (as proposed in policy paper 139) ignores both distance flown and seat Class. Most UK aviation emissions are from long haul, where a First or Business class seat displaces respectively about 5 or 3 Economy seats (see www.seatguru.com), with corresponding emission increases. An Economy seat to Los Angeles emits about 20 times more than a flight to, e.g., Amsterdam. With the above factor of 5, a First-class seat to LA emits about 100 times more. For a rate of £100/tonne, tax on a first-class return to LA would be about £1000, and Economy to Amsterdam about £10. A frequent flyer tax may be reasonable for short European flights, but it grossly under-taxes long haul. Air Passenger Duty takes some account of CO2 differences between long and short haul, and of seat class, but is very imprecise. Neither of these personal taxes does anything to increase load factors.

Aviation is not very price-sensitive, so other policies are also needed. One is public education about the anti-social nature of unnecessary flying, and of flying First or Business class, especially on long haul. Another is for government to set an example, by banning public money being used for First Class long-haul, and by reducing its total aviation carbon footprint (including non-scheduled flights) by at least 10% p.a. The operation of Frequent Flyer Clubs should also be banned (with international agreement) as they increase the amount of flying, including the use of Premium seats.

Conference calls for:

A comprehensive carbon tax on all fossil fuels collected at the point of production or import.

All the money raised (net of partial rebates and costs) to be paid back as a dividend to all UK residents on an equal-per-head monthly basis, with children rated at half the adult rate.

Aviation to be included. If international agreements prevent aviation fuel being taxed, a good proxy is a flight tax based on take-off weight and distance flown.

(a) Public education about the anti-social nature of unnecessary flying, and of flying First or Business class, especially on long haul,
(b) banning public money being used for First Class long-haul,
(c) reducing central government's total aviation carbon footprint (including non-scheduled flights) by at least 10% p.a.,
(d) banning (with international agreement) the operation of Frequent Flyer Clubs.


This is a draft Carbon Tax + Dividend policy motion derived from the earlier leaflet text. I hope a final version gets enough support to be submitted to the LibDem Autumn Conference 2020
It is 930 words long, but still leaves some aspects not discussed. I have included a reference to seatguru.com for info about aircraft seating, but do not expect this to remain in the final version. I have ignored the current (short-term?) reductions in aviation and other emissions.
I will consider any feedback that reaches me.
stewart.reddaway@gmail.com