Article: The UK needs stronger environmental protections across the board

Political flip-flopping is not unique to carbon pricing.

As the debate on which form of carbon pricing would best suit a post-Brexit United Kingdom continues, notions of reliability and assurance have come to the fore, particularly with regards to which type of price signal investors are most likely to trust and put their money behind. But the need to inject reliability into fiscal and policy-based environmental decision making is not confined to carbon pricing alone; we need long lasting environmental policy across the board if we are to deliver on our 2050 net zero commitment.

While a long-term carbon price signal - i.e a clear price that is aligned to emissions targets and increases over time - is favoured by many of the largest emitters, some have argued that investor confidence will be undermined by a carbon tax because ‘no one believes politicians will not scrap it when things get tough'. This is a legitimate concern given the government's history of flip-flopping on climate policy, but is not a criticism that should solely be levied against a carbon tax, nor used to put a nail in its coffin.

The UK Government's decision to continue to issue non conditional financial bailouts to high-polluting industries during the height of the Coronavirus pandemic - in spite of [overwhelming public opposition] to their doing so 2 - has laid bare one of the core issues inherent to short-term political cycles: that environmental policy - whether fiscal or regulatory - is too often subject to the shifting priorities of those in power.

UK Governments have been aware of this limitation for some time and have made efforts to protect our environment from politicisation. Not only did we introduce the world's first climate protection bill - the 2008 Climate Change Act - which has been replicated by countries such as the Netherlands , Sweden and Ireland; we were also the first major economy to legislate for achieving ‘net zero' emissions by 2050. These are bold commitments that demonstrate the UK can take the lead on issues of environmental protection.

But climate targets alone, even if they are enshrined in law, won't get us to net zero. In the UK the social, environmental, and political consequences of a Government failing to meet climate targets are becoming increasingly clear, but that has not been enough for us to deliver upon our commitments: we are still not on track to meet our fourth and fifth carbon budgets, and have yet to produce an economy-wide strategy to deliver net zero. In the absence of formal sanctions for failing to deliver on our own legally binding emissions reduction targets, legal challenges, like the ruling of the expansion of Heathrow airport as unlawful, have had to fill this gap.

This is contrary to the more stringent approach of countries such as New Zealand and Denmark, whose recent Climate Climate Acts ensure - among other things - that all policy decisions undergo a climate impact assessment before being introduced, and that climate change considerations are integrated into foreign and trade policy. This latter consideration is especially relevant to the UK in light of the Government's hesitation to commit to equivalence with EU environmental and animal welfare standards in the UK Agriculture Bill.

The success of decarbonisation will depend as much on the right mix of targets, taxes and regulation, as the ability to make them stick for the long term; it is critical that we find a way to aid investor confidence in the net zero transition. As well as introducing new safeguards to more effectively hold the government to account on their adherence to the Climate Change Act, there is also a clear need to scale the implementation of fiscal de risking mechanisms, and to ensure effective governance over policy making. As the Institute for Government has recently highlighted, there is currently no process for assessing whether Government's overall project portfolio matches UK Carbon Budgets, the Treasury has never systematically integrated climate change objectives into other tax policy, and the ‘Green Book' process - by which carbon-related project assessments are currently made - is not fit for purpose.

There are multiple reasons that the Zero Carbon Commission favour a carbon tax over a trading system, not least to ensure coverage for those sectors that aren't currently subject to a carbon price, the robust investment signal that a pricing trajectory can provide (as opposed to the fluctuations that occur under an Emissions Trading Scheme) and the fact that a tax gives freedom for all actors to choose how to decarbonise, rather than relying on top-down regulation or having to commit to speculative future technologies.

However, we also recognise that a long-term price trajectory such as that we have proposed must be accompanied by effective governance mechanisms if it wants to be considered reliable. This includes the need to establish clear rules regarding how the price trajectory might be changed, and giving new responsibilities to an existing body - such as a sub-committee of the Committee on Climate Change - to report on the impact of carbon tax policy, for example on emissions reductions, progress against UK Carbon Budgets, impact on carbon leakage and private sector investment.

The implementation of a carbon tax faces multiple challenges, and it is not a silver bullet in the fight against climate change. But its potential should no longer be constrained by our seeming inability to commit to environmental policies over the long-term. This is an issue that is currently affecting all net zero policy making, and must be addressed as a matter of urgency if we are to make good on our legislated commitment.