Wednesday, 25 July 2007

The Big Debate: Should my carbon footprint be taxed?

First, what is a carbon footprint?

Think of it as a way of measuring how heavily we all tread on the planet. It's a colourful way of expressing the amount of carbon dioxide, the main cause of global warming, we each emit each year. And this is serious stuff ­ it's measured in tonnes.

How many tonnes?

It depends on who you are and where ­ and above all ­ how you live. On average each of us in Britain has a carbon footprint of about nine tonnes. That compares with about 20 tonnes for each American and around 18 tonnes for each Australian. But the Swiss and the Swedes ­ with higher standards of living than us ­ manage to keep theirs down to about six tonnes.And the big difference,of course, is with the Third World. The average Chinese carbon footprint is about three tonnes, the average Indian one about one tonne and the average Ethiopian about a tenth of a tonne. Lightest of all in their impact are the people of Chad, contributing just one hundredth of a tonne of carbon dioxide each ­ that's 900 times less than us.

Does that matter?

Yes. It matters in rich countries like ours because our profligancy is helping to drive climate change: 44 per cent of all Britain's emissions of carbon dioxide come as a result of the choices we each make in our daily lives ­ such as how we use transport and heat and light our homes. And it matters in poor ones, because they will have to use more energy ­ much of it from the fossil fuels that emit the greenhouse gas ­ if they are to develop. Their need to grow means that we will have to cut our carbon footprints even more if we are to avert global warming running out of control. Science suggests that people in rich counties will have to shrink theirs by 80 per cent by the middle of the century.

Can it be done?

Absolutely. Really simple things like installing energy-efficient light bulbs, improving the insulation of our homes, and not leaving appliances on standby can do a lot. Investments such as getting a hybrid car, or installing solar panels on the roof, can do a great deal more. And new technologies and techniques will keep coming onstream. But human nature being what it is, it would be a great help if Governments took measures to encourage ­ or push ­ us to save energy.

What sort of measures?

Those most mentioned are "economic instruments" ­ which often boils down to a fancy way of describing taxes. Green taxes are becoming ever more popular: opinion polls suggest that Britons back them by a 2 to 1 majority. All the main political parties support them, if to differing extents ­ and several have been introduced by successive Governments, mainly on industry, over the past 15 years. Other countries, particularly Scandinavian ones, have done more. But nowhere has even begun to tap their full potential.

Won't that mean paying even more tax?

Not if it's done properly, as part of what has come to be called " ecological tax reform". That involves reducing taxes like income tax and national insurance by the same amount as green ones are increased, so that the Government's total "take" remains the same. We would therefore be paying more for electricity and petrol, but out of a bigger pay packet. In fact, this could create many more jobs as well as cutting pollution.

How so?

Income tax and national insurance effectively penalise work and employment, things we ought to be promoting, whereas green taxes bear down on things like pollution, which we should be curbing. Ecological tax reform would therefore switch the burden from "goods" to "bads", giving companies a greater incentive to lay off kilowatt hours than to sack people. Indeed a big EU study concluded that it would create at least 2.7 million jobs across Europe, while tackling global warming. Taxes on labour have helped cause employers to use labour 20 times more productively over the last 150 years. Increasing energy costs, partly through taxation, could cause firms to make similar improvements in efficiency, greatly reducing pollution.

But won't this just disappear into the Treasury's coffers?

It could do, but it would be much better ­ at least at first ­ to spend the money on things that will help tackle global warming. People are suspicious: two thirds of Britons believe that governments use climate change as a way of increasing revenue. Making sure that money from green taxes was spent on green projects ­ like improving the infrastructure for public transport ­ would help allay this concern and achieve a double whammy for the environment.

Surely there are drawbacks?

Indeed there are. Perhaps the biggest is that, while income tax is " progressive", hitting richer people harder, taxes on energy could be " regressive", disproportionately hurting the poor, who tend to spend a greater part of their income on keeping warm or getting around. But the Netherlands has shown that these can be tweaked so that they actually benefit the poor, by providing cheap energy to meet basic needs while charging more for luxury use.

So is tax always best?

Not necessarily. People do not always respond to price signals as neatly as economists like to think. Look at how many people still use old incandescent light bulbs even though they cost much more in electricity bills than new energy-efficient ones. It's unfashionable to say so, but regulation can work best. Australia for example has announced it is banning sale of the old style bulbs by 2010.

What about the future?

The really radical idea, increasingly supported by some leading politicians, is to introduce 'personal carbon allowances'. These would give everyone a set allowance of carbon dioxide each year ­ but allow these to be bought and sold. Thus those who wanted to emit more ­ for example by frequent flying - could buy some of the allowance of those who lived more modestly. It would not exactly be a tax - but, one way or another, people who want to have big carbon footprints in future are likely to have to pay heavily.

What is HSBC doing to help? Find out more at
For HSBC, carbon matters. The energy we use to heat, light and cool our buildings and power our IT equipment emits large amounts of CO2. So does our business travel. Increasing levels of CO2, caused by human activity, contribute to climate change and HSBC believes that climate change is the greatest environmental challenge we face this century. As a result, we:

* Measure our carbon footprint and report annually on how much carbon dioxide we emit;

* Manage our carbon footprint to reduce the amount of energy we consume. HSBC has recently committed a further £45 million over the next five years to reduce the bank's carbon footprint. The Global Environmental Efficiency Programme will enable HSBC offices worldwide to showcase environmental innovation and share best practice through a series of initiatives, involving renewable energy technologies, waste reduction programmes and employee engagement to help the bank achieve its environmental reduction targets;

* Buy green electricity. In many parts of the world, including the UK, HSBC buys electricity from renewable sources ­ generated from wind, water, the sun or biogas ­ which produces fewer or no CO2 emissions;

* Offset the remaining CO2 emissions we produce.

HSBC believes accounting for the CO2 we emit is the right thing to do. In 2005, HSBC was the first major bank ­ and the first FTSE 100 company ­ to become carbon neutral. Going carbon neutral reflects our desire to act responsibly and reduce our carbon footprint. As a carbon neutral company, HSBC will incur the additional costs that arise from buying carbon offsets to neutralise the remaining CO2 emissions we produce from our operations.

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