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The Climate Change Levy – Has It Worked?

Taxation is inescapable for businesses and domestic households alike. As a country, the United Kingdom has long used taxation not only to raise funds for government expenditure, but also as a means of steering the habits of the people. Taxation can alsobe used to correct the harmful or undesired trends of trade and industry.

The Climate Change Levy (CCL), introduced in 2001, was announced as having such a corrective purpose. As a society, the UK has been aware for decades that carbon emissions are harmful. From school age up, we have been taught about the environmental damage of carbon emissions.

Much theory has been talked, and various proposals put forward, but when it comes to action, it might be said that little has been actually achieved. The Climate Change Levy was launched, in part, to address this. Has it worked?

Combatting Carbon Emissions

The CCL set out to encourage the perceived main culprits of carbon emissions, industry, to strive for greater degrees of energy efficiency. The encouragement took the form of a tax raised per kWh on gas, coal and electric power. Businesses, it was thought, would naturally look for efficiencies to limit their tax burden.

As time has passed, this has been borne out, though not without some controversy. Power that is derived from nuclear sources is without an immediate carbon footprint: such power is not responsible for any direct emissions. All the same, such power is still subject to CCL taxation.

Some may have seen this as a discouragement of nuclear power generation, perhaps even a nod to increased reliance on renewable energy. Such an impression may have been deepened by the exemption of renewable energies under the initial rates of the CCL. From this exemption, along with the other financial incentives, the first years of the CCL saw renewable energy grow enormously in the UK.

However, such success was to plant the seeds of undoing for renewable energy’s CCL-exempt status. The renewable energy sector simply grew too large and too tempting for tax-exemption. The budget of July 2015 saw the collection of £450m in tax, thanks to renewable energy now lying within the bounds of the CCL.

There were complaints from UK businesses that this was just another tax burden on carbon and energy. These are areas where industries are already burdened with taxation, both explicitly and implicitly. Had the short-term gains of raising new taxes imperilled the long-term strategy of combatting climate change?

Taxing Renewable Energy – A Good Idea?

While arguments can be made for the expediency of taxing renewable energy, arguments can also be made for and against the long term benefits of nuclear power. Such arguments show little sign of being resolved in the immediate future. No one wins in an argument, and the CCL has not emerged unscathed from the controversies surrounding both nuclear and renewable energy taxation.

The purpose of the CCL was lauded as being a reduction of carbon emission, a gentle manoeuvring of business practices over a number of years. A new, greener way of doing things was supposed to emerge, as British industry ‘found its own level’ of energy efficiency, thanks to the coaxing of the Climate Change Levy.

Now that over 16 years have passed since the inception of the CCL, much has been achieved. But has the CCL lost its way? Does the taxation of renewable energy indicate that the original goals of the levy have become obscured by the passage of time and pressures of governmental budgeting?

Direct Carbon Tax – A Better Way?

The question has been posed as long as nuclear energy, with its lack of direct carbon emissions, has been taxed: would it not be fairer to British businesses, and Britain as a whole, to replace the CCL with a direct carbon tax? Could such a tax then be rolled out to domestic households, and even the transport sector, the most notable business sector to remain resolutely free of the CCL?

If a repurposed CCL or a replacement direct carbon tax were to approach the transport sector, it would certainly meet stiff opposition. And what would be the response of UK householders to facing yet another tax? Would they be able to afford the required expenditure to render their homes more energy efficient, or would they just be saddled with an increased burden of taxation?

Government initiatives could be made to offset such domestic costs, but the money would have to be found from somewhere. Businesses would imagine themselves the likely victims, and would be bound to drag their feet. Conflicting interests compound already considerable difficulty of climate change progress.

Making the First Step to Energy Efficiency

Regardless of the successes the CCL has achieved so far, the levy faces an uncertain future. The problems of compromise for legislators are formidable, balancing the demands of the UK economy with the necessity of limiting carbon emissions. It is an unenviable task: does the UK remain merely reactionary to climate change, or can the political will be found to pay the cost now for taking preventative action?

The Climate Change Levy can teach us much about the potential, and the very real limits, of what taxation alone can do. New challenges call for new solutions, and new ideas to deal with climate change must not only be found, but embraced. And this responsibility cannot be confined only to business only, but must be met by us all.

So how can you go about meeting your personal responsibility to deal with climate change? There are many ways, and one of the most straightforward is making sure you have chosen the right energy supplier. Checking through a list of energy suppliers can be another of those unenviable tasks, but thanks to Quote My Energy, it just got a whole lot easier.

Check out our site for all the latest information and make the right choice- for both you, and the environment.

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