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Review of energy costs recommends new tax

A government-commissioned review into cutting the cost of energy has recommended phasing out subsidies for renewables and introducing a universal tax on carbon emissions.

A government-commissioned review into cutting the cost of energy has recommended phasing out subsidies for renewables and introducing a universal tax on carbon emissions. 

Economist Dieter Helm CBE was asked by the government to independently review the UK’s electricity system in August 2017.

The final publication concludes that energy costs are “higher than necessary” and makes a number of recommendations which are to be “carefully considered” by ministers. 

Subsidies

Most notably, Helm recommends that the government intervene less in the energy market by phasing out a number of subsidy programmes - including the popular Feed-in Tariff (FiT), which many businesses receive for installing solar panels.

“It should be a central aim of government to radically simplify the interventions, and to get government back out of many of its current detailed roles”, the review states.

The review also argues that the legacy costs of clean energy subsidies to date should be charged exclusively on consumer bills to reduce energy costs for businesses. 

Carbon tax

Meanwhile, the review says a universal tax on carbon emissions should be applied across the economy, for example by extending fuel duty to cover all forms of fossil fuel use, or by extending the per tonne of CO2 tax that the power sector currently pays to all sectors in the economy. The current cost per tonne is between £12 and £18.

It is currently unclear which of the 67 different recommendations in the review will be adopted by government, considering that it has already published its own Clean Growth Strategy.

The government has now launched a public consultation to allow businesses and organisations to give their opinions on the recommendations.

Business secretary Greg Clark said: “I commissioned this review to start a debate about the future of our energy markets. Now I am opening up that debate, asking everyone with an interest to give us their views on Professor Helm’s ideas for bringing down the cost of energy for consumers.”

The consultation closes on 5 January 2018.