Friday 26 October 2018 7:07 am

The carbon tax cost my company millions – and I’m calling on the chancellor to raise it on Monday


Normally in the week before a Budget, you would expect businesses like mine to be making last-minute pitches to the chancellor for less regulation and a cut in taxes.

Yet here I am about to make a case in favour of the carbon tax – a tax which in the past cost my company millions of pounds. We changed, we cut our carbon emissions, and now I’m asking for an increase which could cement the UK’s leading role in tackling climate change.

This is a case study in how tax can be used to change behaviour for the better.

The UK has made huge strides in cutting carbon emissions over the past decade. Fundamental to that shift has been the carbon price – a tax on the use of fossil fuels – which is estimated to have delivered an 80 per cent reduction in coal-fired power generation since 2013.

It provided an economic incentive for electricity generators to accelerate the move away from coal. It also helped to boost investment in renewable power generation, leading to a massive increase in renewable energy, and a steady reduction in its costs as a result.

But this progress could now stall and go into reverse. There are rumours that a cut in the UK’s total carbon price could be on the cards when Philip Hammond delivers his Budget on Monday.

According to a recent analysis from the energy consultants Aurora, this would be a big mistake. Any reduction in the UK’s carbon price would trigger a revival of coal-powered generation – putting at risk the progress made so far to meet our climate targets.

Worryingly, coal is already making a comeback. In recent months, as wholesale gas prices have soared, it has once again become economic to burn coal to generate power.

The current tax is not high enough to ensure that cleaner technologies are used first. As a result, the UK’s carbon emissions went up by 15 per cent in September alone.

The risk is not only that we will burn more coal and emit more carbon.

Removing the incentive to shift away from these old technologies also risks damaging investment in the renewable power we need to clean up our economy. Importantly, should progress in energy generation stall, other parts of the economy, including transport and industry, will have to decarbonise even faster, increasing costs to both businesses and consumers.

Maintaining a higher carbon price is critical to decarbonising the UK’s electricity sector. My own business proves that this tax works: it incentivised us to convert Britain’s biggest coal-fired power station to become the biggest decarbonisation project in Europe and the largest renewable power generator in the UK.

We will keep working to end the use of coal as soon as we can. But until the UK has finished the job of driving coal out of our energy system, the government must stay the course.

And we are not alone in this call – many other energy companies and environmental groups agree and are urging Hammond not to cut the UK’s carbon price. Rather, he must act to strengthen it.

Among the many tough decisions facing the chancellor, increasing the carbon price should be one of the easiest.

It is the most cost-effective way of meeting the challenge set out by the UN’s Intergovernmental Panel on Climate Change. It will ensure that coal power comes off the grid for good, and shore up new investment in more renewable energy.

And it will send a clear signal to the world that the UK is not turning its back on years of progress.

This is the one tax rise the government can be sure will receive widespread support when we hear the Budget statement come Monday.