Green levy urged for energy market

New taxes are needed to ensure fair play in the energy market after deregulation takes effect in 1998, according to a left-leaning research body, reports Guy Dresser.

The Institute for Public Policy Research said that new levies would be needed to prevent energy companies ‘cherry-picking’ only profitable customers after the monopoly network is disbanded. In the report, Energy 98, the institute said a tax on inefficient users tied to investment cycles could encourage businesses to promote green awareness.

The institute’s chief economist, Dan Corry, said such measures would be linked to reductions in National Insurance contributions. ‘We believe that raising the cost of energy will be a welcome move. In energy-intensive industries it will take time to implement, so we suggest a phased introduction.

It’s a means of obliging them to deliver on efficiency promises. Increased competition is good, but tinkering is needed at the margins to ensure everyone’s objectives are met. This will be a burden on energy-intensive industries, but there will be a benefit by reducing NIC. The business sector as a whole would not see its net costs rise.’

The Government’s Landfill Tax, announced last year, is also linked to a reduction in NIC. Corry said there was a strong case for allying green taxes with lower employment costs: ‘It is widely accepted that it is right to increase the price of energy from non-renewable sources.’