Personal carbon Taxation: its role in climate policy

Dr Tina Fawcett University of Oxford

In the UK, there is currently little interest in exploring increased direct personal carbon taxation as a response to climate change. In theory it should be an attractive policy tool, being cheaper and administratively simpler to introduce than personal carbon trading, and more comprehensive than the current patchwork of product, housing, renewable energy and behavioural policies. So why isn’t it perceived as being an important part of the future policy mix, and is this likely to change?

This paper reviews UK and European evidence on responses to personal carbon and energy taxes and focuses on three aspects; (1) their effects on behaviour in the short and longer term; (2) social acceptability, and; (3) the political risks involved in introducing increases in taxation. Using historical and current evidence, this review concentrates on energy and carbon taxation of household energy, using experience from transport and aviation fuels where necessary to enrich the analysis. It identifies effective taxation policies, and considers whether these could be extended to make a substantial and sustained contribution to household emissions reduction. To explore future possibilities, different proposed designs of taxation and revenue recycling will be considered. The reasons carbon taxation is not a currently popular policy option will be analysed.  Finally, the potential contribution of taxation will be combined with an understanding of the social, political and policy context to discuss whether, and under what circumstances, personal carbon taxation could play a bigger role in future climate policy.