Why let energy companies pass carbon tax on to consumers?March 25th, 2011 by Simon Haddock
Just days after the Ofgem report criticising the UK’s gas and electricity suppliers for not playing it straight with consumers, we hear that higher electricity bills are going to fund a new carbon tax.
Nuclear and renewable energy companies are in line for huge windfall profits after George Osborne announced plans to raise £3.2 billion within the next five years. However, critics of the tax said it was geared towards raising more money for the government rather than providing incentives for companies to produce low-carbon energy.
As from 2013, coal and gas plants will start to pay the tax based on their carbon emissions but they will be able to increase the price they charge consumers to compensate. Companies that produce renewable energy have low emissions and therefore they will pay next to nothing in carbon tax but they will benefit from increased electricity prices.
It has been estimated that consumers could see electricity prices rise by as much as 10% and this would plunge and additional 110,000 households into fuel poverty.
There seems to be something wrong with the logic behind this carbon tax. On the one hand we heard Osborne saying the budget is “about doing what we can to help families with the cost of living” and on the other we discover fuel prices are going to increase dramatically. How exactly does that help already hard-pressed families?
Wouldn’t the better option have been for the Chancellor to force the energy companies to pay the carbon tax out of their own profits?