Wednesday, November 28, 2007

CBI backs Green Taxes

The extent to which business is facing up to its environmental responsibilities is shown clearly by the news that the CBI (confederation of British Industry) is in favour of new green taxes and increases in the price of carbon.

CBI backs new UK green taxes [FT]

The newspapers editorial also comments and seems to have it worked out.

In the hothouse [FT]

Two messages leap from the pages of a report on climate change by the CBI, the British employers' group. The first is that business gets it: global warming poses risks to -society and the economy. The second is that action is needed now.

These conclusions are self-evident. To most people, they are accepted current thinking. The real problem lies in what to do about climate change. Some critics may be tempted to dismiss the report as the glossy progeny of consultants. Indeed, McKinsey, as the appendix makes clear, was heavily involved.

But to see the findings in that light would be unfair. The consultants have earned their fees, producing original analysis on government measures, the development of new low-carbon technology and steps to boost energy efficiency. A key conclusion, surprising given the CBI's role as business lobbyist, is the high price the report puts on emitting greenhouse gases. By 2030 a price of €40 ($59) a tonne for carbon dioxide will be needed, it says, double the present phase-two price in Europe's emissions trading scheme.

This, more than anything else, shows how far business has moved. A report of this kind five years ago would have been unthinkable. Then the sole worry of UK industry would have been its competitive vulnerability vis a vis overseas rivals. Those concerns remain but the emphasis has moved to resisting increases in so-called "green" taxes.

For now, carbon taxes are not on the agenda. Momentum is building behind cap-and-trade schemes. A high projected price for carbon, and the tight limits on emissions that implies, will add to manufacturers' costs. But they are essential for such schemes to be credible. Clear business support should be a spur to world leaders about to discuss a possible successor to the Kyoto -climate change protocol.

The report is optimistic, too, that ambitious targets to cut carbon emissions can be achieved. It argues much can be done in the short term at relatively low cost to meet those goals. More insulation, condensing boilers and low-energy lighting are among steps that could contribute 30 per cent of the necessary savings. Industry, transport and power generation would provide the rest.

Without incentives, this is unrealistic. Despite pledges by big companies, there is little evidence that they have become more energy -efficient. Any well-run business will take basic energy saving measures, but the paybacks from more ambitious schemes take longer than most companies' planning horizons. To vanquish the climate change demon and slash emissions, corporate goodwill is not enough.


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