Fri. Jul 1st, 2022

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On Friday, Insulate Britain, a campaign group demanding that the government explain how it intends to make homes in the country more heat efficient, launched its tenth day of protests. To the great annoyance of motorists, the group blocked arterial roads around London, as far as sticking their hands to the road surface to prevent them from being taken away by the police. While their tactics may alienate more than they convince, the protesters have a point: Britain’s efforts to rectify its dismal, poorly insulated homes are hampered by a lack of combined thinking, embodied in inconsistent carbon taxes and weakened allowances.

This is not the only reason why Britain will struggle to reduce household emissions and achieve its relatively ambitious environmental goals. However, an inconsistent deviation from different taxes, subsidies and regulations has left Britons facing different carbon prices, which in any case discourages investing in isolation.

Carbon prices, probably the most popular means among economists to tackle climate change, is aimed at discouraging greenhouse gas production while the market can still do its job. Individuals and businesses, rather than ministers, can set their own priorities — their own judgment on what will be the most efficient form of renewable energy, or to decide what kind of environmentally unfriendly activities are still worthwhile.

Reducing the carbon footprint of electricity generation — by replacing coal-fired power stations with less carbon-intensive natural gas as well as wind farms and other renewable energy — has been the bulk of the country’s decline in greenhouse gas emissions over the past three decades. It was funded in part by a surcharge on electricity bills that pay for subsidies. A side effect is that the greener electricity generation carries a heavier carbon tax than the gas most commonly used to heat homes in Britain. It collides with the goal of switching fossil fuel heating to, possibly renewable, electricity.

‘A analysis by the influential think tank of the Institute for Fiscal Studies, published this weekend, shows that Britons are facing a carbon price of £ 137 per tonne of carbon dioxide equivalent for domestic electricity, compared to an implicit subsidy of £ 24 per tonne on natural gas for domestic heating, taking into account lower value added tax on fuel than normal goods.

It is therefore a welcome first step that, if unveiled last week by the Financial TimesMinisters plan to shift the green surcharge that pays for subsidies for renewable energy from household electricity to gas bills. This will help get rid of the perverse incentive that those who switch to electrically heated homes of natural gas face higher tax bills because they are trying to do the right thing by the environment.

However, it does not go far enough. Successive governments have halted efforts to encourage investment in isolation. The latest, the Green Homes Grant, was canceled in March this year after less than six months. A roll out too fast and a lack of consultation with industry has increased the cost of the scheme and future insulators can wait a long time.

An unwillingness to increase the cost of natural gas is understandable, as poorer households spend more of their income on heating their homes. But it only underscores the importance of pooled, cohesive thinking on how Britain can achieve its net zero-emission target by 2050. A well-designed isolation program that reduces bills holds the same benefits for the same groups as for the environment.

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