Households should pay higher tax on gas to reflect cost of climate change, say government advisers

The Climate Change Committee said the Government is effectively subsidising the cost of fossil fuel heating and should make it more expensive to reflect the costs of climate change

Gas for boilers should face higher taxes to meet net zero pledges, the government's climate advisers have said.

The Government is effectively subsidising the cost of fossil fuel heating and should make it more expensive to reflect the costs of climate change, the Climate Change Committee said.

A key clause in the Glasgow Pact, signed last month, requires countries to phase out “inefficient fossil fuel subsidies“.

The lack of a levy on gas to reflect the cost of carbon emissions is a form of subsidy, the committee said, and the Treasury should begin a review of tax policy and how it could better help reach the UK's goal of reaching net zero by 2050.

Currently, electricity is artificially expensive, with almost a fifth of the domestic cost made up of levies funding decarbonisation projects, as well as subsidising energy for poorer households, while just two per cent of the price of gas comes from these costs. On average, households currently spend £159 on green levies.

Domestic energy bills also have a reduced rate of VAT, with householders paying five per cent rather than the usual 20 per cent.

The Government has said it plans to “review the imbalance between gas and electricity prices“, the CCC said, but a more fundamental shift in policy was needed.

'There are other ways to support vulnerable customers'

The Government's official position is that the UK does not have fossil fuel subsidies because it does not have a policy to artificially lower prices to below market rates.

But the Committee said the failure to introduce carbon pricing was effectively a subsidy because it meant prices did not reflect the cost of the climate change caused by fossil fuels.

“By this definition, reduced VAT and the lack of a carbon price on gas and other fossil fuels used for heating buildings, and the lack of VAT or a carbon price on aviation fuel are all post-tax subsidies,” the Committee said.

Chris Stark, chief executive of the Committee, said: “No fossil fuel subsidies should be classed as ‘efficient’, given there are other ways to support vulnerable consumers with fuel bills.”

The call comes after Tony Juniper, chair of the Government's nature adviser Natural England, said the “downsides” of environmentally-unfriendly and unhealthy diets and dirty rivers were “hidden” from consumers because of cheap food prices and water bills and that prices should rise to reflect environmental costs.

On Thursday, the Government also unveiled the first stage of its new farming subsidy programme, meant to reward farmers for environmentally-friendly practices such as keeping soils covered in the winter months.

Launching the programme at a conference organised by the Country Land and Business Association, Environment Secretary George Eustice said it was important to preserve British farming as other countries were expected to be hard-hit by climate change.

“Some parts of the world where crops can be grown today may find it harder to grow crops in future. We also have a growing world population set to rise to 9 billion by the middle of this century.

“The temperate regions of the world will therefore need to produce food for markets both at home and abroad and the market signal for them to do so is likely to be strong,” he said.

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