Great Britain slashed its generous subsidies for solar power Friday and is under immense pressure to end its carbon tax as industry threatens to leave the country.
Britain’s ruling Conservative Party says it is cutting the subsidies to protect consumers and the industry from expensive energy bills, which were roughly 54 percent higher than American energy bills in 2014, while energy taxes cost residents roughly $6.6 billion every year. Green energy subsidies and heavy taxes on carbon dioxide (CO2) emissions were responsible for the pricey power, causing British industry and consumer groups to leave the country or heavily lobby for relief.
A major British steel company announced Thursday it was leaving the country due to costly energy and carbon taxation, threatening up to 40,000 jobs.
“We would like to have seen a complete scrapping of the carbon price floor, which is a business-unfriendly concept in terms of international competitiveness,” Claire Jakobsson, the head of energy and environment policy for the U.K Manufacturers’ Organisation, told the Environmental Data Interactive Exchange Friday. “Sparking a change in this is a slow process and if the pricing was removed it would relinquish a whole layer of exposure and pressure on the industry.”
The U.K.’s Department of Energy and Climate Change estimates that ending solar subsidies would save between $57 million and $142 million by 2021. But even with the cuts, green energy subsidies are still projected to increase from $2.8 billion annually in 2012 to $10.8 billion in 2021. That’s quite a lot of money for Great Britain, which will run a deficit of $92 billion in 2016.
Britain has been slashing solar subsidies since July, when government cut funds that exceeded spending caps. The U.K. is still reviewing green energy taxes attached to peoples’s electricity bills, which cost residents and businesses $6.1 billion annually.
Government green energy taxes currently account for seven percent of the average household’s energy bill, according to the UK’s Office of Gas and Electricity Markets. Other environmental taxes such as tariffs and carbon taxation commitments are expected to rise from $8.5 billion in 2015 to $19.3 billion in 2020.
Polling indicates that energy prices were so high that 38 percent of British households have cut back essential purchases, like food, to pay their energy bills. Another 59 percent of homes were worried about how they are going to pay energy bills.
Other than Great Britain, only Ireland, Sweden, Chile, and Finland actually have carbon taxation today. Australia was the largest economy to ever have a carbon tax but repealed it in 2014.
Critics say that carbon taxation disproportionately harms the poorest members of society. A 2009 study by the National Bureau of Economic Research found that a carbon tax would make the tax burden of the poorest households three times greater than the richest households.
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