A simple exercise to convert the duty on petrol to an equivalent carbon tax shows that motorists in the UK are paying some €1,000 or $1,500 per tonne of carbon emitted for the privilege of driving a car! This may be compared with the price of a carbon dioxide permit purchased under Phase II of the EU's scheme whose equivalent cost currently only amounts to some €15 x 44/12 = €55 per tonne of carbon emitted.
The large difference in price (superimposed below on an earlier illustration of energy flows in the UK) indicates that it will take a great deal to persuade consumers to reduce their purchases of such a carbon-intense commodity. Increasing the amount of tax payable is likely to have only a small impact on driving habits, yet brings with it the increased risk of civil disobedience such as occurred in 2000 when truck drivers objected to the amount of duty then payable of fuel. It probably also helps to explain why governments feel more comfortable promoting cap and trade schemes where charges for emissions would be handled indirectly by industry, rather than requiring the consumer to bear most of the cost directly.
Comparison of UK Fuel Duty and the Price of an Emissions Permit
Source: Presentation, Emissions Trading and Carbon Footprints, Sept 2007
Figure adapted from BERR, UK Energy Flowchart, 2004
The following article published on the Biz/Ed website some years ago also provides a brief introduction to the theory of consumer demand and how it responds to pricing and increased taxation. Petrol is a distinctly price inelastic commodity !!
Details of the calculation that I have used to estimate the carbon tax on petrol purchased in the UK are presented below. I would appreciate readers checking my numbers.
Calculation
UK duty from 1st September 2009: unleaded petrol = £0.5619 per litre
Density of gasoline (Table 3-5, API Compendium) : 739.33 kg/m3
--> Fuel duty on unleaded petrol = £0.5619 / 0.739 = £0.7604 / kg
Carbon content of motor gasoline from IPCC guidelines:
Default carbon content = 18.9 kg carbon /GJ fuel
Default net calorific value = 44.3 TJ / Gg fuel
--> 18.9 (kg carbon /GJ fuel ) x 44.3 (TJ fuel /Gg fuel) = 837.3 kg carbon / tonne of fuel
NB: Table 3-5 of API Sangea quotes a carbon by weight value = 85.5%,
e.g. petrol is a highly liquid form of carbon !!
Carbon tax equivalent:
Fuel duty = £760 / tonne of petrol
--> Carbon content = 0.837 tonnes / tonne of petrol
--> Carbon tax = £760 / 0.837 = £908 = €1,000 or $1,472 per tonne carbon !!
Reference Documents
- BN 66, Hydrocarbon Oils Duty Rates. HM Treasury Budget Notes 2009: pages 153-156.
- API Compendium of Greenhouse Gas Emissions Methodologies for the Oil and Gas Industry, February 2004. This can be accessed via the SANGEA web site.
- 2006 IPCC Guidelines for National Greenhouse Gas Inventories, Volume 2 - Energy. See Tables 1.2 and 1.3 in Chapter 1 for default values of net calorific value (NCV) and carbon content (CC).
| Share this post: |  |
 |
 |
 |
 |
 |
