Liberal Democrats

F12: Tackling the Climate Emergency: Proposals for Carbon Pricing (Carbon Pricing Policy Paper)

Motion as passed by conference

Submitted by: Federal Policy Committee

Mover: Lord Oates (Lords Spokesperson for Energy and Climate Change).

Summation: Duncan Brack (Chair of the Policy Working Group).


Conference recognises the accelerating urgency of the need to tackle the climate crisis, and the failure of the Conservative government to put in place proposals to meet the UK's net zero target.

Conference recalls that in 2019 conference endorsed policy paper 139, Tackling the Climate Emergency, which set out a comprehensive programme of emissions reductions, including a sharp cut, to 25 per cent of baseline, over ten years, mainly from the power and heating sectors, followed by a more gradual reduction from those most sectors more difficult to address.

Conference also recognises that the paper did not contain detailed proposals for the use of carbon pricing to reduce emissions, and accordingly endorses policy paper 139A, Tackling the Climate Emergency: Proposals for Carbon Pricing, as a supplementary set of proposals to accompany those in policy paper 139.

Conference believes that increasing the cost of using fossil fuels through carbon taxes, emissions trading schemes or other pricing instruments must play an important part in decarbonising the British economy as fast as possible, but that there are dangers in applying too blunt an approach.

Conference therefore endorses the following principles on which the paper's proposals rest:

  1. Carbon pricing policies which help deliver a just transition, which shares the burdens of decarbonisation equitably.
  2. Carbon pricing policies to be used to target the biggest polluters and those activities where emissions can most swiftly be reduced, in a way that is fair to individuals and businesses.
  3. Support and incentives to be offered to smaller emitters, such as households, to reduce emissions before applying carbon pricing to their energy bills.
  4. Carbon pricing instruments to be combined with other approaches, including regulation, information and subsidy, in order to lead to better and faster outcomes than when used in isolation.
  5. The UK to collaborate closely with the EU, cooperating in carbon pricing policies to maximise impact and minimise problems for business trading across the border.

Conference welcomes the paper's detailed proposals to:

  1. Accelerate the decarbonisation of power and industry (alongside our existing proposals to support the development of renewable power and zero-carbon industrial processes) by:
    1. Raising the price of allowances in the UK Emissions Trading System (ETS) by reducing their number and increasing the auction reserve price, thereby strengthening the incentives for large emitters to cut emissions.
    2. Extending emissions trading to cover suppliers of fossil fuels currently outside the ETS.
    3. Linking the UK ETS to the EU ETS, creating a larger market for trading allowances and thereby improving its effectiveness.
    4. Introducing, in collaboration with the EU, a carbon border adjustment mechanism for high-emission products such as metals or chemicals, protecting UK businesses from competition from imports not facing similar costs.
    5. Simplifying the existing system of energy taxes by abolishing the Carbon Support Price and the Climate Change Levy, which will be no longer needed once the UK ETS is more effective.
  2. Accelerate the decarbonisation of housing (alongside our existing proposals to provide free home insulation to low-income home-owners, introduce a zero-carbon standard for new buildings and require landlords to raise the energy rating of their properties) by:
    1. Widening the list of energy and emissions-saving products enjoying the 5 per cent rate of VAT, and extending this lower rate to all household solar PV and battery systems.
    2. Allowing owners to offset spending on insulation, low-carbon heat sources, EV charging points and climate adaptation measures against their income tax bills.
    3. Graduating Stamp Duty Land Tax by the energy rating of the property being sold, and offering refunds to house purchasers if they improve the rating within one year of purchase.
    4. Working with mortgage providers to encourage them to support energy-saving and zero-carbon measures, including requiring them to report their lending for climate-related home investments, and requiring buyers and mortgage providers to be made aware of the extent to which the property falls below the target energy rating.
    5. Protecting households from sudden price increases by delaying by ten years the extension of emissions trading to suppliers of fossil fuels to homes.
    6. Keeping electricity bills stable by transferring some levy funding for renewables from electricity to gas bills and to general taxation.
  3. Accelerate the decarbonisation of transport (alongside our existing proposals to end the sale of new fossil fuel cars and small vans by 2030, promote cycling and walking, and invest in public transport) by:
    1. Reinstating the indexation of road fuel duty, graduating VED by fuel efficiency and increasing rates for fossil fuel vehicles overall, reducing company car tax for electric vehicles and increasing it for fossil fuel vehicles.
    2. Replacing the limited electric vehicle purchase grant with a 5 per cent VAT rate (up to a ceiling), to be phased out as the market expands, and introducing a zero-emission-vehicle mandate for manufacturers.
    3. Limit the growth in demand for flights by ensuring that no net increase in airport runways across the UK takes place and banning flights where direct rail transport is available for the same journey, up to 2.5 hours, unless planes are alternative-fuelled.
    4. Limit demand for flying by reforming Air Passenger Duty to target the most frequent flyers, and introducing VAT on first-class and business travel.
    5. Introducing a charge on airlines for each take-off, and on flights by private jets.
    6. Collaborating with the EU in extending the UK ETS to non-EEA flights and in placing a specific excise tax on airline fuel.
    7. Including shipping emissions in the UK ETS.
  4. Put in place further measures to:
    1. Prioritise climate change mitigation in agricultural support systems, including measures to increase soil carbon, tree planting and woodland creation.
    2. Work with farmers and manufacturers to support the development of zero-emissions technologies for agricultural machinery, after which red diesel can be included in the UK ETS.
    3. Require a full climate impact assessment of proposed UK free trade agreements to be made public before the agreements are finalised.
    4. Provide incentives for negative emissions strategies, including technological and nature-based solutions.
    5. Boost confidence and stimulate private sector investment by introducing a government-supported Green Finance Guarantee Scheme to offer lenders the assurances they need to provide meaningful funding for renewable energy generation, energy efficiency and green infrastructure.

Applicability: Federal.