Investing money raised through carbon taxes in a major energy efficiency programme is one of the best ways to create jobs and boost the economy, according to a new report from Consumer Focus.
The study, ‘Jobs, growth and warmer homes’, also shows that a focus on energy efficiency could also help tackle fuel poverty.
Today's report highlights that revenue raised from carbon taxes, such as the EU Emissions Trading Scheme, could be used to improve the energy efficiency of homes; delivering warmer homes and cheaper energy bills alongside creating 71,000 jobs by 2015, almost doubling to 130,000 by 2027.
It argues that the Government’s flagship policy, the Green Deal, and the Energy Company Obligation (ECO) could become much stronger through the use of recycling carbon revenues.
On current trends the ECO will take 5% of households out of fuel poverty by 2023, yet if carbon revenues were used to support the programme a staggering 87% of UK households could be removed from fuel poverty by 2016.
Overall this strategy would improve the effectiveness of both the Green Deal and ECO by a factor of four. At present revenues from these taxes simply go into the overall tax revenue pot and are not used to support the very thing they were meant to achieve; reducing carbon emissions, something that energy efficiency can do.
Key findings of the research shows that significant Government energy efficiency infrastructure investment could:
* Generate up to 71,000 jobs and boost GDP by 0.2 per cent3 by 2015 and create up to 130,000 jobs by 2027.
* Lift up to nine out of ten households out of fuel poverty, reducing energy bills in all treated homes by at least £200 per year
* Cut household energy consumption by 5.4 per cent by 2027 and quadruple the impact of the government’s energy savings schemes – Green Deal and Energy Company Obligation
* Cut overall carbon emissions by 1.1 per cent, including household emissions reduced by around 5.6% by 2027
Today’s report shows that more jobs and greater economic growth could be generated through energy efficiency programmes than by an equivalent investment in other Government spending programmes, or by cuts in VAT or fuel duty.
Investing in energy efficiency has other advantages over alternative options. It is fast to mobilise, and would stimulate economic activity and jobs in all regions of the UK. It employs workers in construction and related sectors, which have been hit hard by the recession.
Consequently this sort of investment is less likely than other forms of investment to ‘crowd out’ alternate economic activity. It would also reduce NHS expenditure on treating cold-related illnesses such as respiratory and coronary diseases and reduce dependency on imported gas.
Fuel poverty currently affects over six million UK households, and levels are set to rise as energy prices go up. This is predicted to grow to 9.1 million households – more than one in three homes. Increased investment is needed to make our energy supply cleaner and more secure. Energy consumers will pay an additional £4 billion each year in carbon taxes through their energy bills by 2020.4
From next year the main scheme to help fuel poor consumers will be the heating and insulation improvements provided by energy firms through the Energy Company Obligation (ECO). But Government estimates show this will lift only 250,000 households out of fuel poverty, at most.
Consumer Focus, and a coalition of organisations (The Energy Bill Revolution), argue that a proportion of funds generated by carbon taxes, should be used for targeted energy efficiency schemes. The new report details a range of funding options from using 35 per cent of carbon tax revenue to 95 per cent and how this could cut fuel poverty by 75 per cent to 87 per cent depending on the level of investment.5
Mike O’Connor, Chief Executive at Consumer Focus, said: “We need to make heating our homes more affordable, cut carbon emissions and achieve economic growth. Using carbon taxes to ensure our homes leak less energy represents a triple-whammy.
“This would simultaneously improve the quality of life of millions of people, slash carbon emissions and generate greater economic growth than other measures. Consumers will be paying these taxes through their bills. They can and should feel the benefit.
“Fuel poverty leaves millions of households having to cut back on essentials like food and heating to make ends meet. The Government’s current energy efficiency and fuel poverty plans will only touch the tip of this iceberg.
“However, Government has the opportunity to use the large and stable revenues from carbon taxes to deliver the most breathtaking and transformative energy efficiency scheme that we have ever seen.”
Ed Matthew, Director of the Energy Bill Revolution campaign, added: “The Energy Bill Revolution is the biggest fuel poverty alliance that has ever been formed in the UK. We are united by our conviction that there is a financial solution which can end the suffering and generate more jobs than any equivalent investment.
“This is the Marshall Plan the UK needs to slash the energy bills of the most vulnerable and re-build the economy.’
“Consumer Focus is urging the Government to carefully review this new research and the existing evidence from the Energy Bill Revolution, and consider this policy approach on energy efficiency. It would both help our economic recovery and give vulnerable households ongoing benefits from warmer homes, lower energy bills and better health.”
WWF-UK welcomed today's report and urged the Government to start taking action.
Zoe Leader, Energy Efficiency Policy Officer at WWF-UK said: “WWF has long called for the use of our environmental taxes to support energy efficiency and the UK’s transition to a low carbon economy. This report by Consumer Focus provides us with even more evidence that such a policy should be implemented and implemented quickly.
“With householders facing ever higher energy bills year on year the fact that this policy could reduce energy bills by over £200 a year is compelling, even to Government. With the publication of a new Energy Bill imminent and the need for robust solutions to bring us out of recession the timing for a policy of this calibre has never been better. We urge the Government not just to take note but to take action.”