Treasury response to Stern Review not made with scale or urgency required

Summary

Environmental taxes, as a proportion of all taxation, peaked at 9.7% in 1999 and have declined ever since, falling to 7.3% in 2006.

In this report, 'The 2007 Pre-Budget Report and Comprehensive Spending Review: An Environmental Analysis (HC 149-I)', the Environmental Audit Committee sets out a number of conclusions and recommendations covering different areas of environmental taxation policy.

These include:

Aviation - The Committee welcomes the reform of Air Passenger Duty into a levy per flight rather than per passenger but believes it is vital that tax on aviation is not just reformed but significantly increased so as to stabilise demand and resulting emissions.
Motoring - Road transport emissions in England increased by 12% between 1997 and 2006 and the forecast of further increases makes it important for the Budget to put in place rises in fuel duty.
Carbon capture and storage - The Committee believes it is absolutely imperative that the Treasury provides more assistance for the development of this technology in the UK.
Shadow price of carbon (SPC) - This should be increased to discourage the approval of carbon-intensive policies and projects and so improve the prospects of achieving the reduction in global emission targets.
Environmental transformation fund - The 2007 Pre-Budget Report and Comprehensive Spending Review (Cm. 7227) announced funding for such an initiative, with £370 million to be spent over three years, but only £170 million was new money for the domestic fund. The Committee believes this should be increased.
Emissions trading - The Government needs to be transparent about where reported emissions figures incorporate the purchase of carbon credits otherwise it will be offering a false picture of the decarbonisation progress within the UK.
Public service agreements (PSAs) - The new PSA is too diffuse with no clear departmental targets for reducing emissions. The Government should consider setting emissions reduction targets for specific sectors of the economy.

The Committee believes that the Treasury has not responded on the scale or with the urgency recommended by the 'Stern Review on the Economics of Climate Change' and that the 2008 Pre-Budget Report needs to establish a coherent set of measures to help deliver the UK's 2020 domestic and EU targets on emissions and renewable energy.

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