Search

The UK government's net-zero commitment assumes the use of bio-energy with carbon capture and storage (BECCS) and direct air carbon capture and storage (DACCS). Quantifying where the costs of funding these technologies fall – and their magnitude – provides greater insight into potential fairness of future government policies. Using a microsimulation model, this study is the first to evaluate the potential distributional impacts. We consider the distributional incidence and magnitude on household income deciles if the costs for deploying and operating BECCS and DACCS are placed on different sectors of the economy via a range of viable policy funding options. Using existing and novel policy funding options, we demonstrate that levying the costs entirely on the household energy bill is the most regressive of the options considered. We find aviation to be an important point of intervention from a distributional perspective. Higher-income households have larger aviation carbon footprints than lower-income households, meaning passing costs onto households via aviation alone could help fund BECCS and DACCS while having minimal impacts on social welfare. Funding BECCS and DACCS via income tax emerged as the only progressive way of apportioning costs across income deciles. As the benefits of carbon removal accrue to society as a whole, there is further argument that the costs should be shared across society in the fairest way possible. However, such an approach has the potential to blunt the price signal that polluters face. In reality, some pass-through cost may be desirable to adhere to equity principles under a polluter pays principle and to create an incentive for polluters to switch to cleaner inputs and adopt low-carbon technologies. This study is the first to evaluate distributional incidence and magnitude of costs to households, if costs for deploying and operating BECCS and DACCS are placed on different sectors of the economy. Recovering policy costs via income tax provides a progressive option to fund BECCS and DACCS. All modelled alternative funding options result in regressive outcomes where low-income households pay disproportionately more towards the costs of BECCS and DACCS. Funding BECCS and DACCS through levies on household energy bills further entrenches inequality; spend on electricity as a share of income is disproportionately high for low-income households. [ABSTRACT FROM AUTHOR]

In the UK, the cost of low-carbon policies, such as renewable energy subsidies, household retrofit and installation of smart meters, adds an additional 13% to household energy bills. Given that the lowest income households spend 10% of their income on heating and powering their homes, whereas the highest spend less than 1.5%., any increase in prices hits the poor disproportionately. Using an energy-extended multiregional input-output model combined with household expenditure survey data, we calculate the full supply-chain energy embodied in goods and services consumed by different households. First, we demonstrate that low-carbon policy costs are placed on a small percentage of household energy demand – perversely on items representing a higher proportion of expenditure for low income households. The lifestyles of higher income households require nearly five times more energy than the lowest, but because levies are only raised on energy bills, those with high incomes pay only 1.9 times more towards policy costs. Second, we evaluate alternative approaches to funding low-carbon policy: a household energy footprint approach, taking account of households' full energy service demands; and funding the costs from general taxation payments. We explore the demographic characteristics of the households who would pay less towards funding policy costs and those who would take on a larger burden under these new proposals. While none of the approaches offer a 'perfect solution' in terms of distributional impacts, raising the funds through general taxation offers a fairer and practical solution. Key policy insights Low income households currently pay disproportionately more towards low-carbon policy costs in the UK. Funding low-carbon policy through general taxation would better align energy demand with policy costs, and would reduce costs for 65% of UK households. Households comprising women of retirement age living alone; single parent families; and households who have never worked or are long-term unemployed could see reductions in bills by recovering climate policy costs through general taxation. A general taxation approach requires leadership and long-term commitment to avoid leaving the policy vulnerable to short-term budgetary changes. [ABSTRACT FROM AUTHOR]

Existing international emissions reduction policies are not sufficient to meet the internationally agreed objective of limiting average global temperature rise to ‘well below’ two degrees, resulting in an emissions gap. Materials - such as aluminium, cement, paper, plastics and steel - act as a carrier of industrial energy that allows, through trade, the transfer of embodied emissions between sectors and countries. However, the use of materials has been overshadowed by policies focusing on energy efficiency improvements and deployment of a low carbon energy supply. This article argues that policies based on material and product demand can support domestic climate change mitigation and reduce the emissions gap, yet there is little obvious integration between climate and material efficiency policies. The article investigates current ‘emissions flows’ through the EU economy and how much of these are captured and excluded from existing EU climate policies. We analyse the potential increase in emissions coverage that would be achieved by extending EU directives that currently target the energy use of products (cars, buildings and appliances) in operation, to include the emissions required to produce the goods (i.e. embodied emissions). The analysis shows that a greater integration of material efficiency strategies within climate change mitigation policy could significantly increase the emissions coverage of existing product policies. Key policy insights Consumption is a key driver of emissions and demand reduction is an important policy option in reducing emissions, at least in the short-term, to reduce the risks of a longer-term reliance on technology breakthroughs and while the EU carbon price remains low. Emissions embodied in material-intensive manufactured products consumed in the EU represent the equivalent of over 40% of EU production emissions, offering significant scope for emissions reductions along product supply chains. Consumption measures that target the use of materials and products offer complementary mitigation options to low carbon energy supply technologies alongside costs savings. Existing EU policies addressing the energy efficiency of products can be used to scale up material efficiency measures. [ABSTRACT FROM AUTHOR]