The government is pushing hard for Britain to become a net zero carbon economy. Many say it should be pushing harder, but we have to balance this with the very difficult times we live in.
Many people are really struggling financially at the moment. Those that can afford to be green need little support. It is the millions of people who simply can’t afford to be green that need government help if we are all going to make the transition to a net zero Carbon future.
Part of the government’s ecological drive, as we know, is to make the transition to cleaner, greener forms of energy creation and to stop burning fossil fuels to heat our homes.
Air Source Heat Pumps (ASHP), that can sustainably heat our hot water for radiators, underfloor heating and washing are seen as one of the most ecological ways forward, particularly if you buy your electricity from a renewable supplier.
The air source heat pump industry is growing steadily year-on-year, but it is still well short of the government’s targets of 600,000 heat pump installations per year by 2028.
The entire industry is only installing around 10% of that figure in 2024. So, we have a long way to go, but what an exciting opportunity it is! So, what is stopping us hit that 600,000 figure?
I find it bonkers that the green taxes on electricity are higher than the taxes on gas
George Clarke TV presenter, architect, writer and Ecodan Ambassador
There are 2 key issues:
ONE. We know that the capital costs of replacing your old gas boiler with a new ASHP can be prohibitive for many, particularly when we are experiencing a very difficult and painful ‘cost of living crisis’, but the government is providing very good incentives for those who are considering making the transition.
Its Boiler Upgrade Scheme is definitely working as demand from consumers continues to rise and it is fantastic that you can get a £7500 grant from the government to support the cost of your new air source heat pump Installation.
This is a significant contribution and certainly helps address some of the capital cost problem
TWO. But there is another significant problem, which must be addressed and needs to be addressed quickly.
It is known as ‘THE SPARK-GAP’. We know that electricity is cleaner than gas, but unfortunately it is way more expensive than gas.
On the 23rd of July 2024 moneysupermarket.com published this gas and electricity price comparison information on it’s website:
“On the face of it, gas is significantly cheaper than electricity. The current energy price cap at the time of writing, due to run until September 2024, puts the cost of gas at 5.48p per kWh (kilowatt hour), while electricity costs more than four times as much, at 22.36p per kWh.”
Some of the reasons for this price imbalance are fascinating.
Carbon taxes
The biggest reason is that electricity is subject to carbon taxes, whereas gas used for heating is not.
Yes, electricity does cost more than gas, but taxes and levies on top of this wholesale price have made the electricity-to-gas cost ratio very high in the UK. It is worth explaining exactly what a carbon tax is.
A carbon tax is an ecological-tax placed on a product (ie. electricity) based on each tonne of carbon dioxide (CO2) discharged from it.
By imposing a price on carbon, the objective is to divert consumers from products or behaviours with high levels of greenhouse gas emissions because the more greenhouse gases a product emits, the more it is taxed. To me, that makes sense.
But what doesn’t make sense to me and what I actually find slightly bonkers, is that the green taxes on electricity are higher than the taxes on gas.
Why is that when we know that electricity can be greener source of energy and we are trying to reduce our dependency on gas? Surely we should be taxing gas more than electricity!
The headline reason given is that electricity is taxed more because electricity generation has a higher potential for decarbonisation. (I still don’t quite get it.)
Does this make sense?
So, if I’ve got this right, the government has tended to load ‘policy costs’ onto your electricity bills, the idea being that if the government generates more money from higher taxes on electricity, the more money they have in the coffers to promote renewable energy generation schemes such as wind, solar and hydro power and they can also fund very important social programmes that tackle fuel poverty.
So, we tax more on electricity in the hope that we can invest that money in using more green forms of electricity.
Historically, most of the charges that fund these programmes have been placed on electricity bills, rather than on gas bills. That genuinely makes no sense to me, but I’m not a tax expert or an economist.
As customers, who might be keen to use electricity driven systems to heat and power our homes and charge our electric cars, we are basically paying a lot more tax for that privilege.
A simple solution
Surely, if we all agree that we should be using less gas and more renewable energy then gas should be taxed more?
But, I can understand how angry the gas industry would be if we were to tax their industry more, to then fund clean electricity initiatives such as wind, solar and hydro. That could be seen as unfair to the gas industry, and to the many, many households still depend on gas.
One simple solution would be to level the playing field and reduce the carbon taxes on electricity, so the price of electricity is comparable with that of gas.
The subsidies and investment then needed for renewable energy, clean, green electrified technologies would then be generated through general taxation rather than through an unfair carbon tax on electricity or an unfair tax on gas. That could be the way forward.
What is absolutely clear is that the government’s current policies on carbon taxation are outdated and need to be changed quickly to help us all make the transition to a net zero carbon future.
This should benefit ALL consumers. It will also benefit the planet.
George Clarke is a TV presenter, architect, writer and Ecodan Ambassador
