Boris Johnson is looking at imposing new green levies on gas as prices have reach an all time high, according to a leaked document seen by Sky News.
A leaked draft of the forthcoming Heat and Building Strategy reveals the government has concluded it must end the difference between the cost of electricity and gas for consumers.
Currently there are levies on electricity, which is a more green form of energy, but not gas, which is less environmentally friendly, and the green drive in coming years will mean a much larger reliance on electricity to heat homes and power cars.
Gas Production Platform in southern North Sea
Pic Alamy
Ministers must choose between imposing new levies on gas and risk accusations of causing new pressures on the cost of living, or scrapping existing electricity levies which would lose the Exchequer around £5 billion a year.
No decisions have been made by ministers, who are expected to release the Heat and Building Strategy before world leaders gather in November for the COP climate change summit in Glasgow.
The document reveals that drastic action is planned to stop discouraging people from switching from gas to electricity.
“The price differential between gas and electricity is a critical barrier to decarbonisation of heat and will need to be addressed, as we know the way costs are passed through to bills can incentivise or disincentivise certain types of consumer behaviour.”
There is a difference in levies because historically electricity was produced by dirtier forms of energy such as coal, though that is less often the case today.
The document goes on to say this disparity must be addressed: “We will take steps to address the distortions in energy pricing so that low-carbon heating technologies can compete fairly with fossil fuel technologies in relation to running costs.
“We will examine the case for applying carbon pricing fairly across energy vectors. The government will publish proposals later this year on improving the price signals to consumers to address these current market distortions.”
There are a number of ways this distortion can be dealt with, but Sky News understands the leading idea over the summer was a levy on gas.
This removes distortion and raises more cash for the Exchequer which can be used towards other decarbonisation activities. Since then however, wholesale gas prices have reached new all-time highs and market prices have quadrupled in the past year.
The leaked document specifically suggests levies are a key idea under discussion. “We recognise that there are a variety of options in how these costs can be socialised. Levies can offer a way to disincentivise high-carbon activities and fund decarbonisation action.”
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A Whitehall source said suggestions of a potential gas levy were “well-informed”. They added that Whitehall is looking at the expansion of the new emissions trading system, and pointed to the EU equivalent which has already imposed more levies on gas.
“Carbon pricing is still our most effective and efficient tool to drive decarbonisation,” said one Whitehall source, but stressed no decisions had been taken and the gas price rises of recent weeks had caused pause for thought.
Tory MP for South Thanet Craig McKinlay said his constituents would see the prospect of putting a tax on gas prices in the current climate as “grotesque”.
He said he hopes the policy “never sees the light of day” and that some “common sense” needs to be applied to the government’s net zero ambitions.
