UN Climate Change Conference in Cancun, Mexico

Cancun Climate Change Conference: Britain is Urged to Impose £15 Billion in Green Taxes

Cardboard versions of the world's best known landmarks stand in the ocean at the Gaviota Azul beach in Cancun

December 8, 2010

Daily Telegraph - British taxpayers could pay an extra £600 per year in green taxes to help poor countries cope with the floods and droughts caused by climate change, Lord Stern has suggested.

The economist said the UK would have to contribute around £1.5 billion from 2020 to a new ‘green fund’, that is expected to be set up during global talks on climate change in Cancun this week.

The Treasury is unlikely to set up new mechanisms to raise such a small amount of cash. Therefore it is better to raise ten times as much and use just ten per cent for the green fund. The rest can be used as the Government sees fit.

Lord Stern said an extra £15 billion could be raised in taxes on polluting industry and power from coal, gas and petrol. Although the levies will be directly on factories or power stations, eventually it will come down to the consumers.

If every householder was to pay the same amount it would cost £600, although ultimately it is likely to be unevenly distributed as households with more cars or high energy use will pay more.

“People would see these tax rises through electricity, through cars,” said Lord Stern.

However he was keen to point out that the overall bill for households would not necessarily increase as taxes should reduce elsewhere. Also energy costs should come down as a result of improved efficiency and more renewables.

“This is a story of people paying for the damage they do, this is stopping subsidising pollution,” he said.

“This is a story of shifting the basis of taxation, it could be from VAT, it could be income tax, or they could fund schools. This is a change in the balance of taxation.”

The UK is already paying billions of pounds installing wind turbines and other green energy sources, as part of global efforts to cut carbon emissions.

Lord Stern, a former Government adviser who first warned of the costs of climate change, is attending the United Nations talks in Cancun to advise leaders.

The ‘green fund’ or ‘climate fund’ is a key element of the talks as it will not only help poor countries adapt to global warming, but help develop green technologies like wind turbines and solar panels so carbon emissions come down.

Countries are expected to agree to the principle of the fund and commission further studies into how the money will be raised. A substantial proportion of the money could come from new international taxes on aviation and shipping or on banking transfers. The rest could come from public money contributed by each country.

The world has agreed £60 billion or $100 billion should be raised per annum by 2020. Most of the money will go through the green fund, although some may come through other existing mechanisms like the World Bank or from the private sector.

The UK Government has accepted it will pay its fair share towards the green fund but has not yet decided how the money would be raised.

Chris Huhne, the Energy and Climate Change Secretary, said Britain was ready to play a key role in ensuring the talks are a success.

With just two days to go, we’re reaching a crunch point,” he said. “Let me be clear: a car crash of a summit is in no one’s interest. The answer has to be compromise. We cannot do everything here. But we can make progress.”

However aid agencies and charities are becoming increasingly nervous Mr Huhne may have to fly home to support the Government on a key vote on tuition fees. They argue that it could be “terrible news” for the talks if the British minister is to leave at such a key stage.