One of the central planks of the government's strategy to reduce greenhouse gas emissions is flawed and should be replaced by a tax on carbon use, Britain's academy of science, the Royal Society, argues today.
The climate change levy, which came into effect in April last year, is designed to encourage businesses to be more energy efficient and to use more renewable energy, by putting a tax of a fraction of a penny on each kilowatt-hour of coal, gas, oil, or electricity used.
A Royal Society working group of scientists and economists, chaired by the organisation's treasurer, Sir Eric Ash, argues that the system is failing because of inconsistencies and exemptions.
Users should be taxed according to how much carbon dioxide is emitted as a result of their energy consumption, they say in a report. While the climate change levy does give most forms of renewable energy a price advantage over conventional, transport and domestic energy uses are exempt.
Nuclear energy, which does not emit greenhouse gases, is treated as if it does.
Sir Eric said the government's existing policies were failing. "The UK's carbon dioxide emissions have started to rise again. If the government ... misses the opportunity to reverse this trend, the UK could hasten the onset of potentially catastrophic climate change."
Carbon dioxide released when fossil fuels are burned is thought to contribute to an alteration of the Earth's atmosphere such that heat becomes trapped, raising average temperatures over time. There is doubt that under present policies Britain can meet its aspiration of a 20% reduction in carbon emissions between 1990 and 2010.
"The climate change levy is not a cost effective way of reducing the amount of carbon dioxide that is pumped into the atmosphere, as it is a tax on energy and not on greenhouse gases," said Sir Eric. "The levy does not apply to the use of fossil fuels by households and transport, and penalises electricity sources that do not produce greenhouse gases."
The report says that a carbon tax might add an extra penny per kilowatt-hour to household electricity bills, and 6p to a litre of petrol.
Although a carbon tax might bring home to individuals how much carbon dioxide they were generating, and might spur the development of renewables like wind energy, it would be politically difficult for any government to sell.
It would penalise the coal industry; put nuclear energy on a par with wind, wave, tidal and solar; and burden households with a new tax.