Crackpot green taxes you're never even told about

By This Is Money
Updated: 03:25 EST, 9 June 2011

 

Academic and man-made climate change sceptic Dr Benny Peiser claims the taxes that add to our bills are based on a fallacy...

Scottish Power has understandably provoked howls of protests after announcing plans to raise its gas price by a thumping 19% and its electricity tariffs by an inflation-busting 10%.

And over the next few days and weeks, I am sure its main competitors will announce similar price hikes — leaving Britain's unhappy householders facing annual power bills some £200 higher than they were a year ago.

Of course, the power companies will offer the normal excuses. Media trained chief executives will point to increases in wholesale power prices, which have gone up by about 25% since last winter.

And no doubt one or two will blame increased demand from Japan in the wake of the earthquake and tsunami last March.

But none of them, I'll wager, will mention one of the biggest reasons why our power bills only ever seem to be heading up and up and why — regardless of what's happening in the wholesale energy market — they could easily have doubled by 2020.

Spurred by the Government's stubborn but wrong-headed commitment to renewable energy, so-called green stealth taxes are already adding 15% to 20% to the average domestic power bill and even more to business users.

And yet, despite the growing cost of these taxes, you won't find any mention of them at all on your gas and electricity bills.

That, of course, suits the Government down to the ground. If it raised the huge sums required to encourage renewable energy and limit carbon emissions through general taxation it would make the Government itself very unpopular.

But by doing it through electricity and gas bills, the Government has cleverly ensured that it's the power companies that take the blame.

The fact that these taxes currently don't even appear on our gas and electricity bills makes it even easier for the Government to get away with this cunning sleight of fiscal hand.

So, what should be appearing on our power bills? First is the so-called Renewables Obligation, which currently requires power companies to buy 11%of their power from renewable resources.

The problem is that renewable energy — most of which comes from on and off-shore wind farms, solar panels and biomass plants (power stations fuelled by wood chippings and agricultural matter) — is between three and five times more expensive than power from conventional sources such as coal or gas.

So by obliging power companies to buy this more expensive renewable energy — and latest estimate suggests off-shore wind-farms could be up to ten times more expensive — the Renewables Obligation already starts to inflate our power bills.

Sadly, however, it doesn't stop there.

Next is the European Emission Trading Scheme, which requires all energy-intensive companies to off-set their emissions with so-called carbon credits — permits which allow companies to emit a specific amount of waste.

At the moment, these are free, but they won't be for much longer, with new measures due to come into force next year — another reason why our power bills are heading only one way.

The Carbon Emissions Reduction Commitment, which requires energy suppliers to invest in expensive technology to reduce their carbon emissions, also does nothing to help.

Then, at least for corporate customers, there is the Climate Change Levy, which effectively taxes businesses, companies and public bodies on the energy they use.

So when added to the other climate change taxes, the average British business is already facing a power bill some 20% to 25% higher than it should be.

But unfortunately it's not going to stop at that. The Treasury itself already admits that scheduled increases in the Climate Change Levy will see business power bills increasing by 70% by 2020, regardless of what happens in the wholesale market. Outside observers, however, believe the bills will double.

And that's before the Carbon Floor Price — the controversial measure introduced by Chris Huhne in March — comes into effect in 2013.

By charging power companies and heavy industry for their CO2 emissions (at £16 per tonne, rising to £30 per tonne in 2020), the Chancellor has admitted that the aim is to make power derived from fossil fuels deliberately more expensive, making both nuclear power and renewable energy look more competitive.

• More on Green taxes and climate change:

- Climate change folly 'costs 1% of GDP'
- Hidden green tax adds to fuel bills

And yet he's done this at a time when Britain has reserves of fossil fuels for years to come, in the shape of coal, gas from shale and, of course, North Sea Oil, which may be in decline but is nowhere near to running out.

And yet businesses all over Britain will be needlessly forced to pay more for power from such sources, robbing them of funds that could create jobs and pay for investment.

It's the final unseen tax, however, that is perhaps the most outrageous. It's now widely accepted that landowners and big businesses have started to invest in renewable energy projects — be they wind or solar-powered — only because of the huge subsidies being offered by the Government.

At a time when household savers are struggling to get a 0.5% return on an instant access saving account, some of these renewable energy subsidies — paid in the form of generous payments for the electricity produced, so called feed-in tariffs (FITs) — are guaranteeing annual returns of 10%.

Small wonder that after years of disinterest and inactivity, renewable energy projects are now popping up all over the place.

These direct subsidies are paid for out of general taxation — in other words by every individual or corporate taxpayer — to the current tune of some £1.5bn a year.

But research has shown these subsidies are being paid to some of the wealthiest landowners and biggest businesses in the country, including the Crown Estate.

It's one of the biggest wealth transfers — from millions of ordinary hard-working taxpayers to a few hundred of the hugely wealthy — in British history.

It's staggeringly unfair and, in the growing opinion of many, totally pointless.

Not only is much of the science behind the idea of global warming now being disputed but, at a time of such widespread economic hardship, we simply cannot afford to misdirect scarce economic resources on such a massive scale.

Britain needs jobs, it needs industry. What it doesn't need is rows and rows of heavily-subsidised wind turbines.

People, however, will only realise that when the cost to each and every one of us becomes readily apparent and, at the moment, it's being deliberately hidden.

The Government has to come clean and force the power companies to make their bills fully transparent.

For residential customers, the cost of the Renewables Obligation and European Emission Transfer Scheme needs to be itemised in the same way VAT currently is. If the EETS really is costing each household an average of £100 a year, then householders have a right to know that.

For business customers, many of which pay huge power bills already, both the Climate Change Levy and the Carbon Floor Price, where appropriate, need to be separately quantified and itemised.

Only then will those facing spiralling power bills have all the information required to make the appropriate decisions.

Only then will it be possible to see if a power company has been raising its prices unfairly and change supplier.

And only then will the true cost of the Government's mad rush towards renewable energy become clear, allowing voters to back or sack those who formulated the policy.

But full transparency could have also have one other benefit.

It could persuade the Coalition Government to rethink this misguided and unaffordable energy policy altogether.