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The Carbon Tax Poverty Effect

Author: Maureen Bader 2007/11/25

Imagine carbon taxes so high that people can't afford to heat their homes in the winter. Think this could never happen Think again. It's happening right now in the UK and could happen here too if the current climate change hysteria allows government to carry through with similar measures.

The UK government imposes three measures that significantly increase the cost of electricity to residential consumers; the Climate Change Levy, the Renewables Obligation, and the EU Emissions Trading Scheme.

The Climate Change Levy taxes energy use in industry, business, and the public sector. It is considered a revenue neutral way of reducing CO2 emissions. However, according to the UK National Action Plan, virtually the entire cost of CO2 reductions will be borne by consumers of electricity. Why Because the industry can flow 100% of the cost increase through to consumers.

The Renewables Obligation (RO) obliges UK electricity suppliers to source an increasing proportion of their electricity from renewable sources. If they do not, they must pay a buy-out price of £33.24 ($67.53) per megawatt hour. The total value of the RO buy-out fund on October 1, 2007 in the UK was £235 ($447) million.

The EU Emissions Trading scheme has resulted in a subsidy from the UK to the rest of the EU of £470 ($955) million. The UK is sending millions of pounds to other European countries in exchange for hot air. Although only the Climate Change Levy is strictly a tax, the other two are coercive state measures that increase the cost of energy, which is passed on to the consumer.

To help consumers deal with the increase in electricity prices, the UK developed the Fuel Poverty Strategy. A fuel poor household needs to spend more than 10% of its income on fuel for home heating. Fuel poverty fell from about five million homes in 1996 to about two million in 2001, the year the Fuel Poverty Strategy began. It has remained at that level since then. True, world fuel prices have risen, but taxes passed on to the consumer magnifies those increases.

The UK government has simultaneously created a carbon tax and subsidy policy. The UK Treasury collects between £700-800 million ($1.4-$1.6 billion) per year with its Climate Change Levy. The budget for households suffering from fuel poverty is about £800 million per year. There is a deep perversity about significantly increasing the cost of energy only to turn around, after the bureaucracy takes its cut, and fund people in fuel poverty.

Meanwhile, back home, our own energy use is subject to a levy (government speak for tax) on our hydro bills. We have our own renewables obligation with the government's decree that all new electricity purchased by B.C.'s electricity monopoly, BC Hydro, emit net zero greenhouse gas emissions. The B.C. government is also a partner in a number of emissions trading schemes.

If residential electricity bills in British Columbia double over the next 10 years, the government will almost certainly have to set up its own fuel poverty strategy. Who is the carbon tax policy benefiting in the UK Bureaucracies are booming. Global warming theorists and academics are doing well too. Homeowners and taxpayers Well, they're not doing so well. A poorer population won't help the environment either. The bottom line is that CO2 emissions continue upward in the UK. Welcome to British Columbia in 2015.


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