The Greens

If you like the Greens because of their underlying socialist philosophy, then frankly we are not for you. But if you are simply interested in more effective policy on energy and the environment, and care more about practicality than dogma and rhetoric, then supporting Freedom & Responsibility will achieve much more efficient and effective solutions than the Green programme.

There is not an infinite amount of money and there are not infinite resources in the world. Money spent on one thing cannot be spent on another. Resources built into one thing cannot be built into another. Economic and resource efficiency should be as big a priority for greens as for any other group.

The current mish-mash of targeted, micro-managed environmental and energy policy is utterly ineffective and wasteful. The proposals of the Greens would only make that worse, by increasing the targeting and winner-picking. When you give more money to more-expensive solutions, and less money to less-expensive solutions, you have to accept that you will get more of the expensive solutions and less of the cheap solutions than you would have got if you had not targeted support according to "need". And after all, the environment doesn't care how the carbon is saved, and our energy resources don't care how we use them most efficiently.

The targeted approach also leaves big holes in policy, in areas where savings might be achieved more efficiently than in the areas where governments have chosen to throw money. So, for example, we provide totally inadequate incentive to use energy efficiently, and we undervalue the environmental services provided by rainforests and other essential habitats.

The harsh truth that no party (including the Greens) wants to acknowledge, is that it is counterproductive to try to encourage people to use less of something (e.g. domestic energy) by "supply-push" (e.g. subsidising technology),  while simultaneously trying to keep its price as low as possible. The outcome of that contradictory approach is either failure if the encouragement for supply-push is inadequate, or the Rebound Effect (e.g. where savings from the technology are used to fund increased consumption or to increase the comfort level rather than reducing the consumption) if the supply-push measures deliver technology. Either way, you don't get the savings you paid for.

The only real way to encourage people to use less of something is to raise its price. And price increases are also technology-neutral, so they encourage whatever measures most efficiently respond to the price signal in each circumstance, without the inefficiency and perversity of targeted measures.

We believe that man-made global warming is a risk of which we should take account. But even if the risk turns out to have been over-estimated, we believe that there are powerful economic and security reasons to try to reduce our consumption of fossil fuels, for which we are increasingly dependent on imports from unstable or unfriendly parts of the world.

We therefore propose to reflect these two risks (environmental and security/economic) through two levies applied at the point of import or production of fossil fuels. We would apply a carbon levy at an initial rate of £30/tCO2 (applied on the basis of the emissions from each type of fuel when it is burnt), and promote an alternative approach to Kyoto, to try to get agreement to a more rational and politically-acceptable system to discover (rather than calculate) the cost of carbon emissions. And we would apply a fossil-fuel levy at an initial rate of £30/MWh (applied on the basis of the calorific value of each type of fuel when it is burnt) to encourage reduction of and diversification away from fossil-fuel consumption.

These levies could be adjusted according to their effectiveness. But they are set at a level where they could be expected to have significant impacts on people's energy-consumption incentives, on a technology-neutral and end-use-neutral basis. People would simply look for the most efficient ways of cutting their energy costs, and the value of doing so should be such that it justifies investment in the most cost-efficient solutions.

Because the current mess of interventions has such widely-varying and disproportionate effects on the costs of energy in different sectors and from different technologies, there would be winners and losers from this equalisation and simplication. The greatest winner would be all of us as taxpayers, as we could scrap most of the expensive and ineffective measures currently in place (though we would be careful to "grandfather" any existing investments). Another big winner would be road-users, as they are currently so heavily over-taxed. This may seem counter-productive to some greens, but there is strong evidence that the levels of tax on road-users in the UK, which are so much higher than other countries with even more efficient vehicles fleets, is no longer about delivering efficiency and all about milking drivers for the sake of the Treasury.

The sectors that would feel their costs increase the most would be domestic and (to a lesser extent) industrial energy. Domestic consumers of fossil fuels, either directly for heating or indirectly in the production of electricity, are heavily insulated against true costs. This has the effect of reducing incentives to efficiency, and results in the UK having some of the most inefficient housing stock and almost complete dependence on fossil fuels in the domestic sector. This approach, favoured by all the main parties, is one of the dumbest ways that could be devised to deal with "fuel poverty". Far better to make domestic energy expensive by taxing it equally to other energy uses, but use the revenue from the tax to support those who can't afford the more-expensive energy, than to make domestic energy cheap, inflate demand and drive up the prices of our foreign suppliers. In this world of increasing competition for increasingly-scarce resources, energy is going to be more expensive. It is simply a choice of whether the money goes to the Treasury (using tax to suppress demand and thereby the prices of our suppliers) or to Vladimir Putin and King Abdullah.

Industrial energy consumers are already burdened with costs that are not applied to domestic consumers, so the general increase in costs would be offset to some extent by the abolition of these targeted measures. But our industry is already facing enough challenges without making things worse. It would be important, therefore, to use some more of the revenue from the taxes applied to fossil fuels to support our industry, particularly our energy-intensive industry, in other ways that compensated for the increased costs. For instance, we have suggested business-rates exemption for energy-intensive industries, and reduction in taxes on employment for all businesses. By making energy relatively expensive, but reducing other costs (and particularly employment costs) to compensate, we encourage a high-efficiency, high-employment economy without having to get into the hopeless business of picking winners, at which government is always so useless.