The Economist business magazine (or newspaper as it likes to call itself) has long advocated a carbon tax as the best way to deal with the threat of global warming. In preparation for its pre budget advice to chancellor George Osborne it commissioned an economic modelling firm, Cambridge Econometrics, to work out the likely effect on the UK economy of a carbon tax which raised about 1% of GDP by 2020. Such a tax would not only raise revenue – about £18bn by 2020 – it would also stimulate economic growth. Cambridge Econometrics calculated that output would be 1.2% higher with a simple carbon tax at around £30 a tonne of carbon, than with the present hotch potch of fuel duty, subsidies for renewable energy, and other measures.
Sadly, as we now know, Mr Osborne didn’t go for it. In fact, this budget is about the least green budget we’ve had for a long time. Apart from a vague promise to look at aviation tax (per plane rather than per passenger) and, if we’re being generous, a commitment to fund rail improvements in Newcastle, Birmingham and Sheffield, there was nothing there to justify his boss’s claim that the Conservatives were determined to make Britain a leading player in the low carbon economy.