Carbon 68% Target by 2030

According to the National Audit Office “Achieving net zero is a colossal challenge and significantly more challenging than government’s previous target to reduce emissions by 80% by 2050.”[1] Similarly the recent commitment by the UK Government to a reduction of 68% of carbon emissions below 1990 levels by 2030 is highly ambitious.

The UK currently tracks emissions reductions via 5-year carbon budgets set out in the 2008 Climate Change Act aligned to the previous 80% target. The first three, covering 2009 – 2022, are likely to be met. However, budgets 4 and 5 (2023 – 2032) are off track[2], even before considering the stricter 2030 and 2050 commitments. Reducing emissions to net zero is a colossal challenge for government and business, although one that comes with real opportunity.

The escalation of the target means that all sectors of the economy and all businesses need to consider, plan and implement their path to net zero emissions. Offsetting can play a part of course, when combined with deep reductions in operations, but alone it will be insufficient.

The Department for Department for Business, Energy & Industrial Strategy (BEIS), responsible for meeting these targets, has not produced full estimates of benefits in achieving net zero, but initial work suggests that costs could be offset even when considering only a narrow set of benefits (fuel savings, air quality improvements and an estimate of the cost of carbon saved by reducing emissions).

In addition to voluntary efforts, we believe stronger Government intervention will arrive sooner rather than later. Carbon taxes are an obvious tool in the climate change armoury, yet to date they have received a bad press. Consider the Gilets Jaunes in France when higher taxes on diesel were introduced and the paused fuel-duty escalator in the UK. Each case sparked fuel protests underpinned by a common view, reinforced by poor design, that fuel taxes fall more heavily on the poor.

However with some careful design and clear messaging carbon taxes can raise significant revenue in a fair and progressive manner. Some countries have taxed carbon for more than 25 years, but most schemes are more recent. Where emissions are taxed, this has helped to lower emissions, even though tax rates are often low or subject to significant exemptions.

And here is the key. According to a recent study by Leeds University[3], “The wealthiest tenth of people consume about 20 times more energy overall than the bottom ten, wherever they live. The gulf is greatest in transport, where the top tenth gobble 187 times more fuel than the poorest tenth…The researchers found that the richer people became, the more energy they typically use. And it was replicated across all countries.”

So taxing carbon can be politically controversial but according to the LSE[4] it is possible to design a carbon tax that is both effective and publicly acceptable. In the UK, the BEIS calculator[5] plots the price of a tonne of carbon from £14 in 2020 to £80 per tonne in 2030. The tax should take into account existing fiscal measures (e.g. taxes on transport fuels) and should be subject to transparent rules allowing observation of the environmental effectiveness of the tax and the ways revenues are redistributed.

A government committed to net zero and with a large Covid-shaped hole in their coffers will be tempted by a progressive tax on carbon, with the tax burden falling progressively on the rich. This could be a politically acceptable method of raising revenue whilst supporting the ‘colossal challenge’ of 68% and net-zero targets.

The alignment of environmental and financial benefits of net zero have never been clearer. For businesses this leads to a simple conclusion: starting on the path to net-zero today will mitigate additional overheads tomorrow. At Klere we believe that today’s trailblazers in sustainable operations will be tomorrow’s industry leaders. Well, what are you waiting for?

[1] Achieving-net-zero.pdf

[2] Achieving-net-zero.pdf

[3] https://www.bbc.co.uk/news/business-51906530

[4] https://www.lse.ac.uk/granthaminstitute/publication/global-lessons-for-the-uk-in-carbon-taxes/

[5] Updated short-term traded carbon values used for UK public policy appraisal: 2018 (publishing.service.gov.uk)

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