'If a form of tax on carbon emissions is introduced to the UK, we need to be able to measure its impact fully' said Chas Roy-Chowdhury, head of taxation at ACCA (the Association of Chartered Certified Accountants).
This was the conclusion of a recently held roundtable event about green taxes, hosted by ACCA.
The event called Carbon taxation: enough to change corporate behaviour and significantly mitigate climate change? was held to discuss the potential of carbon taxes addressing climate change, and the relative costs and benefits of such taxes versus other market mechanisms, as well as the impact of carbon taxes on business.
Along with Chas Roy-Chowdhury, who chaired the roundtable, were panellists Chris Sanger, head of tax policy at Ernst & Young; Dr Alex Bowen, principal research fellow at the Grantham Research Institute on Climate Change and the Environment; and Lloyd Fleming, managing director – Europe at the Carbon Trade Exchange.
The panel of experts discussed the economics of carbon emissions, putting environment policies into practice, and Australia’s introduction of the Australian Clean Energy Act that comes into force in July.
When talking about the Clean Energy Act, Lloyd Fleming explained it is not strictly a tax but a cap-and-trade emissions trading scheme with a fixed price period between 2012 and 2015. The Act is designed, however, to continue the shift to consumption-based tax for individuals and to deliver personal income tax reform.
Dr Alex Bowen suggested the Government could ask the Committee on Climate Change to handle the issue of taxing carbon emissions, or putting regulations in place, here in the UK, drawing on the model of the Bank of England’s Monetary Policy Committee.
Chas Roy-Chowdhury asked Chris Sanger if regulation would be a better way to resolve the matter of greenhouse gases.
In response, Mr Sanger said: 'We should look at using regulation where we can, as part of the five ways of intervening (including taxation, spending, information and voluntary agreements) but it is not good for directing economic growth. It is more of a ‘stop and go’ mechanism, and in many cases we are trying to deter rather than eliminate'.
Chas Roy-Chowdhury also asked Chris Sanger if he thinks businesses will relocate to avoid having to pay environment taxes. Chris responded: 'We need to design the system so that it is easier to abate tax costs internally than to relocate the business'.
Mr Roy-Chowdhury concluded: 'ACCA’s previously published report, called Green taxation in a recession, included five recommendations for the future:
- Ensure green taxes are global, with global co-ordination of policies and ideas.
- Design and implement green taxation policies carefully - and then measure and analyse the results.
- Consult widely with electorate / business before introducing taxes so they understand what is happening and why.
- Raise awareness of the need for this type of taxation - explain the benefits.
- Make green taxes explicit and transparent, so they are understandable.
'Being able to measure how effective green tax policies are, is vital to tackling the issue of climate change. Without this measurement, we are never going to truly know how successful the tax is, and this is crucial if this is the way tax policy is moving across Europe and around the world'.