The case for carbon fee and dividend in the UK

If we start from the position that in order to slow and halt the climate breakdown we need a root and branch systems change in the way our economy and society is structured and operates, we need to recognise that responses have the potential to negatively impact the least well off in our society.

We know that environmental harms caused by human activity, like air pollution, and that rising energy costs are issues that disproportionately hit the most vulnerable and those with least financial security. 

Every intervention or systems change aimed at slowing the climate breakdown therefore needs to satisfy these questions;

  1. Does this change recognise the magnitude of and respond sufficiently to the threat of climate breakdown?
  2. Does this change meet our obligations to protecting and safeguarding our planet for future generations?
  3. Does this help our economy move to a low or zero carbon footing?
  4. Does this help households adapt their practices and weather the changes in our economy?

Responding to the climate crisis should, fundamentally, be viewed through an economic and social justice lens.

Creating a low or zero carbon economy

Ending our dependence on fossil fuels is one of the biggest changes we could make to slow the climate breakdown.

  • Burning coal, oil, and natural gas is responsible for two-thirds of humanity’s emissions of greenhouse gases, and yet provides more than 20% of GDP in two dozen nation states.
  • Energy accounts for two-thirds of total greenhouse gas emissions and 80% of CO2. Global energy-related CO2 emissions grew by 1.4% in 2017, reaching a historic high of 32.5 gigatonnes (Gt), a resumption of growth after three years of global emissions remaining flat.
  • Emissions from the EU Emissions Trading Scheme (EU ETS) rose by 0.3% in 2017 – the first rise in 7 years.

Moving from dependence on fossil fuels and meaningfully driving rapid investment in renewable energy does have the potential however to leave many people in the UK behind.

Analysis by the Joseph Rowntree Foundation in 2013 concluded (or rather confirmed) that the richer you are the higher your carbon footprint and the more able you are to withstand price increases or invest in energy efficiency. Policy Exchange argued that the Carbon Levy is neither sufficient to tackle the climate crisis and has the potential to negatively impact households with less economic and financial security.

The reality however is that for as long as fossil fuels remain artificially cheap and profitable, their use will continue to dominate the market.

That’s why I’ve been drawn to a UK-wide Carbon Fee and Dividend programme.

This includes placing a fee on fossil fuels as they are extracted in, or imported into, the UK with a dividend distributed equally to UK citizens. According to a growing body of evidence, this is the fairest and most effective way of getting to zero carbon and would support business to move to cleaner energy production. Poorer households would also stand to benefit most from a carbon dividend.

In my next post, I will look at how this will work.

* Rhys Taylor is leader of the Liberal Democrat group on Cardiff Council.

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This entry was posted in Op-eds.


  • William Fowler 15th Oct '19 - 10:05am

    I was reading this with the usual dread but cheered up a bit towards the end paragraph, though it would be quite a complex arrangement to implement, I fear, but nonetheless a very interesting concept that might encourage low energy usage were the rates of dividend capture able to be ramped out for higher energy users.

    I do wish the LibDems would come out with somethings as simple as the abolition of standing charges on energy bills – something easily understood by voters and a vote winner – as they do affect low energy users disproportionately and often make frugality seem a bit pointless. The Conservative’s energy policies have actually ramped up the cost of the couple of companies that do offer no standing charges, as usual with Mrs May’s efforts, lot of unintended consequences.

  • Is this different from a national carbon tax with rebates scheme, like, for example, the one in Canada?

  • nigel hunter 15th Oct '19 - 11:42am

    Fossil fuels artificially cheap. Could this be cos onshore solar and wind projects are not subsidised and have to stand alone? I say this cos offshore farms have been subsidised by govnt verses not on land. This subsidy is still in operation but declining. These subsidiesa have profited foriegn companies at the expense of uk ones. trust that on a level playing field on shore companies (hopefully British) can enter the fray.A carbon tax on fossil fuels could help along with the reintroduction of council solar policies.

  • The message on this is simple, tax polluters pay people.

    We need clear messages and policy but we also need policy to stackup and respond properly to the challenge/crisis.

    Yes, Canada are now doing the same.

  • Green policies are playing a major role in the Canadian election coming next week. Interestingly the big gainers in the campaign are the NDP (they have now reached 20% in todfays polls & BQ and it looks increasingly likely that if they both eat a little bit more into the Liberal vote then the final result will be a very minority government, probably Conservative.

  • Laurence Cox 15th Oct '19 - 12:40pm

    My electricity supplier (Bulb) charges 12.94p/kWh for electricity (100% renewable) and 3.21p/kWh for gas (10% renewable, with the other 90% carbon offset). If we are to get to zero carbon, that means a taxation of at least 9.73p/kWh on gas to raise its price to at least equal the price of electricity.

    Will Rhys Taylor’s next post be hardening up his proposals with real figures (in terms of p/kWh) that make sense to the user?

  • theakes – honestly, it’s mostly about Trudeau lit up his own seat with the SNC Lavalin debacle. But he also pissed up BC and to a lesser extent Quebec support by approving the filthy Albertan pipelines despite promising to stop them in 2015 (a politically dumb move, as Albertan oil industry will never ever return to its peak again and Alberta will not vote for Trudeau no matter how hard he tries to placate them). Had he written off Alberta and chosen BC/Quebec and decisively focused on new industries, his platform would have been much more consistent and powerful. However, Liberals will win a minority and that’s what I want, real changes historically mostly happen under Liberal-NDP minorities. Conservative support concentrates too much in Alberta/Prairies, and newest polls suggest that NDP/BQ surges have peaked. New 53-billion-cut CPC platform is scaring folks into voting Liberals again in Ontario, and NDP surge actually hit Conservatives as well.

    nigel hunter – in order for British firms to compete, any form of subsidies and industrial support strategy, onshore or offshore, must cover the whole industrial value chain, not just the final stage.

  • If we are to take seriously the problems which are being caused by the environmental degradation of our planet we need to find a way of making decisions which can make everyone feel part of the solution. This could result in better decisions.

  • Peter Hirst 16th Oct '19 - 2:29pm

    We will canter towards 100% renewable electricity, electric cars and heating. That is the easy part. Changing our habits, insulating our homes better and eating more sustainably will take longer. Flying less or not at all, consuming less and more sustainably is still a pipe dream. We will need to take a lot of carbon out of the atmosphere to limit warming to 1.5 degrees.

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