Our work on the Climate Change Levy: reported on HM Revenue and Customs website
Our study for HM Revenue and Customs, as reported in Budget 2005 , examined the environmental effectiveness of the Climate Change Levy (CCL), focussing specifically upon the identification of any 'announcement' effects and the effects of induced price changes on energy markets and greenhouse gas emissions (GHGs). The findings were used to support the British government's analysis of the CCL in delivering carbon dioxide savings by 2010, published in Section 7.19 and Box 7.2 of the UK Budget 2005 report 'Investing for our future'. The study was led by CE in collaboration with the Policy Studies Institute, Westminster University and the Department of Applied Economics, University of Cambridge. The overall objective of this study was to investigate the effectiveness of the CCL in reducing energy use/carbon emissions, which was its principal purpose, and, where possible, its other (eg economic) effects. It was essential to consider the effects of the Climate Change Agreements (CCAs) in the modelling work, since the overall impact of the price signal provided by the CCL was necessarily influenced by the presence of the CCAs. This innovative study used the Cambridge Econometrics MDM-E3 (energy-environment-economy) model of the UK to construct alternative scenarios, combined with off-model analysis and other research methods where necessary. The project contained the following three elements, which were addressed in turn: first, the investigation of the CCL’s announcement effect (if any) on business energy use, supported by a comprehensive technical paper proposing a ‘best practice’ method or economic evaluation following a literature review of the announcement effects of carbon/energy taxes and related ex-post evaluation studies; second, the investigation of the CCL’s effects since its introduction on business energy use so far; and finally, the likely energy and carbon savings from the CCL by 2010 that were informed by the findings from the ex-post analysis.
Tthe full report can be found here.
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