If you read beyond the squeals of indignation from the latest TaxPayers Alliance “research” you find an interesting conclusion. The taxes we pay on measures aimed principally at reducing carbon dioxide emissions are much lower than the cost of those emissions to the economy. So we should be putting more tax on carbon dioxide, and perhaps less on good stuff like work!
The TPA, better known for their corporate tax avoidance and personal tax evasion than robust research, have really gone to town on environmental taxation. So here are two fatal flaws and an interesting conclusion for those worried by the headlines.
First, they pit these taxes against the cost of carbon dioxide emissions. But by their own, buried and obfuscated admission, these taxes do a lot more than just reduce carbon dioxide emissions. Fuel and vehicle excise duty, which make up the bulk of the taxes, also address congestion, air pollution, service maintenance and help to suppress the level of driving generally. Landfill tax targets the waste of good land being used up for rubbish, and forces councils to get a move on with decent recycling facilities for residents.
The real cost of the taxes that specifically target carbon dioxide emissions is much smaller than they suggest.
Second, they chose a completely misleading figure to estimate the cost of the carbon dioxide emissions. They use an estimate which takes the cost to society of the emissions, then deducts the immediate benefits. They pretend this low figure is representing the gross costs. If you look at the costs based on the Government’s shadow price for carbon, the costs come out – shocker – three and a half times higher.
This real cost of the emissions is actually higher than the real cost of the taxes that directly address those emissions. Nice one, TPA.
The other interesting nugget is in their analysis of who these taxes affect. If you’re lucky enough to live somewhere with plenty of public investment in public transport, energy efficiency programmes and good recycling facilities, the cost of these taxes is far lower for you. So the best thing is to, er, live in a green area! Nice one, TPA.