Every time a polluter fails to pay for the climate damage, that’s a windfall. So a temporary windfall tax is not the answer

Opinion by Mathew Carr

The Financial Times’ pp8-9 spread Saturday hints at why a temporary windfall tax is not the answer to the climate crisis.

There’s a fascinating juxtaposition of a story about windfall tax policies being “tricky” and an advertisement by SSE (the utility formerly known as Scottish & Southern Energy) setting out a template for the world to follow at COP27, the global climate conference beginning Sunday (today).

Admittedly, the FT’s story is mainly about the cost-of-living crisis, not the climate crisis.

Here is the story, with a section snipped, below.

The problem with windfall taxes is they tend to have sunset clauses so they add to uncertainty and so boost the cost of capital. They chop and change.

That’s bad because $4 trillion of capital a year is needed to try to save the climate.

A carbon price with a rising floor and ceiling would work better, because there would be some certainty for investors.

What the story fails to cover properly is that every time a polluter puts heat-trapping gas into the atmosphere, that polluter (or producer of the polluting fuel) gets a windfall (no matter if prices are low, or are ramped by OPEC, gasOPEC or a war).

To attack that permanent windfall from fossil fuels, all nations need to put a price on pollution, which the UK does for utilities, but not for cars and home boilers. They need to stop subsidizing fossil fuels.

Policy makers gathering at the climate conference in Egypt might focus on the advice in the SSE advert instead of the windfall-tax idea. Keeping it simple is more efficient.

All fossil fuel burning should incur a price. Permanently. All around the world. Then emissions will fall quickly, because markets will play into the climate’s favor.

Put a price on the bad behavior – expensive, dirty fossil fuels. Then people will favor clean, cheaper renewable energy, solving both the cost-of-living crisis and the climate crisis.

SSE / KPMG ‘s 5-point plan for the world

Snip of the ad:

Source: FT

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