date: Wed, 8 Mar 2000 13:00:39 GMT from: "J Kohler" subject: Re: what can we say about the CCL? to: j.kohler@econ.cam.ac.uk, , tsb1@econ.cam.ac.uk, Mike Hulme Mike, An initial response. 1. It is an important issue. Economically, an energy tax can change industrial and consumer behaviour significantly, especially in the medium to long term. There are lots of studies with examples of investment with very short payback periods for energy saving in many different industries. Obviously it is high on the political agenda. It is pretty difficult to differentiate ourselves from the imperial bid; they have modellers and policy experts who know just as much about this stuff as we do. And all the issues are well known. We may well have an advantage at microeconomic/behavioural analysis with SPRU. So perhaps we could say something about demand management - which leads into household energy use and the appalling state of the insulation in the UK housing stock. And emphasise interdisciplinarity - life cycle analysis of the most energy intensive products, if SPRU or Simon have any readily available results. So 'Joined Up Thinking' i.e. the interrelationships between different policies is important. Do you have any case study work or business contacts you could tap, Simon? What we could do: write a letter to e.g. the Times, if there will are more articles on the CCL; issue a Press Statement/Briefing on how the CCL/trading scheme should operate; read the budget speech and respond to it on the 22nd. But I notice that Mike grubb hasn't mentioned the intial allocation of permits, which is an important issue. And another thing is regional differences, which may well explain political decisions, as a lot of the energy intensive industries with large numbers of jobs are in (traditionally) Labour areas - Sunderland, Ellesmere Port, Grangemouth. Will the CCL apply to Scotland? Some immediate points 2. Different industries respond in different ways. Several of the 'energy intensive' industries e.g. cement or petro chemicals claim that their processes depend on energy use so that a tax just puts up their costs, so they either lose profitability or sales to international competition. This is partly true. It also depends on how often they invest in new plant and whether they have recently invested. If they have, they have large fixed costs, so they won't respond to price signals as fast as old plants. 3. Which industries are included makes a lot of difference. Current CCL proposals leave out the electricity industry, (the largest user of energy), for example. 4. Carbon permit trading can theoretically replace a tax. a n important issue is how the permits are initially distributed - this determines the possibilities for profits from trading as well as the incentives to save energy. I'll check the papers to see if there are any more relevant stories. Jonathan Date sent: Tue, 07 Mar 2000 22:12:02 +0000 To: j.kohler@econ.cam.ac.uk,,tsb1@econ.cam.ac.uk From: Mike Hulme Subject: what can we say about the CCL? > Terry, Jonathan and Simon, > > Given our proposed project C1 in RP2, given the continuing debate about how > the government will announce the CCL (see Blair report below) in the budget > the day before our presentation to the Panel, given Mike Grubb's prominence > in this area (what role is Grubb having in government circles right now, do > we know?), is there anything we can do/say re. the press in order to draw > attention over the next 2 weeks to our expertise in this area? > > What can Tyndall offer here that Grubb and Imperial could not? Really how > big an issue is this in the context of the Qs being addressed by the > Tyndall Centre? > > At the very least, some good sound bites from you would be useful to have > up my sleeve for the 22nd March presentation. > > Mike > > __________________________________________ > > 1) BLAIR BACKS POLLUTION PROPOSAL > Financial Times > 28 Feb 2000 > > Tony Blair has backed plans for a market trading pollution permits by April > 2001. Business leaders said the prime minister hinted at a Downing Street > meeting on Monday that the government may also introduce tax breaks to > encourage its development. Trading permits is seen as a means to deliver the > government's commitment to cut carbon dioxide emissions - which cause > global warming - by 20 per cent by 2010 and resolve the controversy over > the new energy tax on industry. The planned administration and > effectiveness of the tax is criticised in a report from the House of > Commons environmental audit committee on Monday morning. > > Mr Blair told business leaders of his enthusiasm for an emissions trading > scheme yesterday. The gathering included senior managers of BP Amoco, Blue > Circle, PowerGen and Ford. "If business does not seize its chance, it risks > being left behind," he said. A pollution permit market would involve > companies being given a target level of carbon dioxide that they are > allowed to emit. If they cut emissions below target they can sell permits; > companies failing to meet their targets will have to buy permits. The > system has long been advocated by environmental economists as the best way > to cut pollution for the lowest cost. > > But businesses insist there will have to be a reward - perhaps an exemption > from the climate change levy or a cut in corporation tax - to persuade them > to take part. Chris Fay, chairman of the government's advisory committee on > business and the environment, who attended Monday's meeting, said: "For a > trading system to work, there has to be an incentive for companies to put > themselves on the block by agreeing targets. Without incentives, it will be > very hard to get a system going." He added that he hoped the chancellor > would give a clear signal to business in next month's Budget. > > There are still some complex issues to be resolved, including exactly which > companies will be covered. But businesses involved in developing a scheme > believe it could be up and running by April next year - the same date the > climate change levy takes effect. > > See also -- > > UK'S BLAIR MEETS BUSINESS ON CLIMATE CHANGE LEVY (Reuters) > Internet: http://www.planetark.org/dailynewsstory.cfm?newsid=5828 > > >