How should Greens deal with rising petrol prices?
Petrol prices are going up. This hits people in the pocket – hard. At a time when most people haven’t had a pay rise in years, this is particularly tough. But, traditionally, greenies have argued in favour of more expensive fuel – right? We need to put fuel prices up in order to wean our society of oil? Right? Well, I’m not convinced, but we’ll come to that later.
I wrote back in January about how the coming fuel price rises pose a real threat of splitting the anti-cuts movement. For big G Greens, this is a huge threat. In May, we have elections for the Scottish Parliament, Welsh Assembly, and local councils across England. Both the Scottish and Welsh campaigns are focussing on our opposition to cuts and privitisation. In the 2007 elections, the perception that we were primarily the “Green Taxes Party” – pushed by the right but never properly countered by us – did us serious damage. I have never seen a study of its impacts on those elections, but I spent most of a month knocking on doors all across Scotland, and it was clearly a major problem people had with the party.
As with all elections, and as with all votes, it wasn’t the policy itself. It was the values that the policy seemed to enshrine. Greens are often percieved as a party who are not on the side of ordinary people. We are seen as a party that wants to force people to do things for their own good – things they don’t particularly want to do. Green taxes became emblematic of that. This problem mostly disappeared with the credit crunch, and as Greens learnt to stop talking about green taxes. But, with a decision on the fuel price escalator due just a month before the polls, it looks like it might rear its ugly head again, just at the most dangerous time for Green candidates.
And how should Greens face that problem?
Well, let’s look at party policy. The Green Party (Scottish and English/Welsh) is not in favour of taxing fuel to solve climate change. We used to be. But a few years ago, we realised that this wouldn’t work. And so we changed our policy. Instead, we have 2 other policies: domestic tradable carbon quotas – carbon credit cards – and, crucially, the Green New Deal.
Why did we change our policy? Well, after lengthy discussion, workshops with experts, etc, we came to the conclusion that taxing carbon wouldn’t work. From 1990 to 2000, the price of a litre of unleaded petrol went up from 40.2p to 76.9p – it nearly doubled. Carbon emissions from transport went up by about 10% (pdf) over the same period. Because travel (and heating our homes) are things we value, we are willing to stop spending money on other things in order to be able to spend it on increasingly expensive fuel. This ‘inelasticity’ in our demand for oil makes a tax a pretty inefficient way to help us use less of the stuff. We need to invest in the infrastructure to enable people to get this transport and their warm homes without relying heavily on oil.
And fuel taxes are problematic for other reasons: most pollution comes from the rich. In order to change their behavior, you’d have to hit the poor so hard as to ruin their lives. And then you’d have to raise prices some more. Essentially, rising fuel prices is the ultimate market solution – you put up the price of one commodity, and hope that the market will re-organise itself around that. This doesn’t work. The reason that fuel price rises are so unpopular is that they ruin people’s lives. Without serious investments in the infrastructure required to ensure that people don’t rely on oil, putting up prices is just locking people into further poverty with no viable get out. People won’t stop using petrol, they will just have to cut back on the other stuff they buy to make up for the money they are losing. The market won’t come and rescue the poorest people. It won’t magically lay on buses to the poorest area or insulate our houses or make our streets safe for cyclists. It never has.
Tradeable quotas would be better as they’d give everyone, rich and poor, an equal pollution permit. No one could be priced out. But ultimately, quotas are neither a solution on their own, nor at all viable given the handful of seats Greens can reasonably expect to gain in this election. And so what position should we be taking in the face of rising fuel prices? The same one that we’ve been pushing for the last 3 years now: a Green New Deal. We need massive infrastructure investment to cut people’s fuel bills – so that, together, as a country, we can end our addiction to the black stuff that is going to carry on getting more and more expensive, no matter what we do.
This means fantastic bus and train services. This means insulating everyone’s house for free. This means making sure it’s safe for your kids to cycle to school; and it means doing all of this now. Are we in favour of raising fuel prices at a time when everyone’s income is crashing through the floor? That isn’t our party policy, it wouldn’t work, and I don’t see why we should sacrifice our chances of winning seats in Scotland, Wales and across the country to defend it.
It’s vision and values, rather than individual policies, that win elections. But those visions and values emerge from voters joining the dots between policies. The future of the Green Party lies in voters recognising that we are the party standing with them against the onslaught of corporate neo-liberalism coming this way. And if fuel prices continue to go up, these elections may well be defined as much by these prices as they will be by cuts. The party can choose to paint a portrait of ourselves as distant nannies who only listen to centrist Westminster think tanks and so think we know what’s best, and we can send our candidates like lambs to the slaughter to defend high prices our parties’ policies don’t support. Or we can use every second we have to make it clear that we have the same day to day stuggles as those we hope will vote for us – that a green society is one that is better for all of us: we can oppose cuts and wage freezes and privitisation and articulate a vision for a society that isn’t dependent on more and more expensive oil. The future of Greens in Scotland, Wales and England may well depend on our success in doing the latter.
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Adam, you wrote that ‘Ultimately, I agree that we need to find a way to restrict our fuel use, and that might mean price hikes – it probably will mean price hikes. But I don’t think that we should support a system that will screw millions if it doesn’t first give them a viable way to avoid the higher prices.’
Instead of giving them a way to avoid higher prices, they could be given a viable choice of paying them, or more often, hopefully, spending the extra money on something else instead.
What is needed is a revenue-neutral Green Tax Switch or Shift from income tax to carbon taxes or quotas. This was popular with the Lib Dems a few years ago, but now they seem to have dropped it. Theoretical work has been done on it by the Green Fiscal Commission
(www.greenfiscalcommission.org.uk).
Why isn’t the Green Party interested in this? Probably because they have the typical left-wing knee-jerk belief that progressive income tax is necessary for redistribution, and aren’t aware of the difference between progressive marginal tax and progressive average tax.
An example of this difference, at
http://ammpol.wordpress.com/ammgraf, shows that what opponents of flat rate taxes are doing, perversely and counterintuitively, is favouring inequality. In a choice between progressive marginal tax or progressive average tax, everyone who is concerned about poverty should prefer progressive average tax.
I agree that the Green Party should oppose the fuel tax increase in April. In 2008, at the time of the last fuel price spike, Martin Wolf wrote that “high prices . . . will play a big part in encouraging more efficient use of this finite resource and ameliorating climate change. The current shock offers a golden opportunity to set a floor on prices, by imposing taxes on oil, fossil fuels or carbon emissions.” (Financial Times, 14 May 2008).
My interpretation of this was that taxation should be aimed at stabilising prices at a high level. Taxes on consumers could be reduced when prices are surging upwards, but should be increased when prices start to fall. Alternatively a market in carbon quotas would make these price adjustments automatically, with government revenue coming from auctions of upstream quotas. ( http://www.guardian.co.uk/commentisfree/2008/sep/10/climatechange.ethical living )
The taxes or quotas could be made revenue-neutral by using the revenue to pay for citizens incomes. Additional taxation of fuels at source might remain appropriate at any price level, to collect some of the energy companies’ profits without affecting prices.
I agree with Jos that the Green New Deal reinforces the view that the Greens are not economically realistic. And I agree with Chas that having a world-class public transport system is not enough if there’s no ‘push’ factor as well.
“The future of the Green Party lies in voters recognising that we are the party standing with them against the onslaught of corporate neo-liberalism coming this way…”
Yes….but it depends how you put it. ” ‘ello madam, how do you feel about the onslaught of corporate neo-liberalism coming this way…” sounds like a line from a Monty Python sketch to which the riposte is something along the lines of “…mmm, I don’t know. Have next door got some…?”
Your central point is a good one though. We should be wary about extrapolating from our idea of the good life as individuals to a blueprint for a better society.
Most people want a quiet life free from worry and a better future for their children. Their community spirit lasts until there are queues to buy bread (or fuel) at which point it evaporates.
If we set ourselves the goal of envisioning a sustainable society with a minimum hassle quotient and where fun amounts to more than an arran sweater and a Chieftans CD we might win people round. Voters wants solutions not problems, yet all too often Greens seem to devise policies which cause people problems rather than offer solutions, and simple, affordable ones at that.
And above all it needs to be something that can be communicated in plain and human terms – not something that sounds likes it’s passed through all seven stomachs of a Marxist cow before being translated back into English from the original Latin.
Of course that would take all the fun out of conference, but what the heck 🙂
Agree that the Greens need to be on the side of ordinary people. Agree with the need for green investment and that people need a proper alternative i.e. great buses and trains.
But the overall cost of motoring keeps falling while the cost of public transport fares keeps rising, and fuel price changes do make a difference to behaviour. Also, the poorest people suffer most from our car dependent culture.
I’d be interested in your thoughts on this http://bettertransport.org.uk/system/files/Transport_costs_and_carbon_emissions_executive_summary.pdf
I absolutely agree with Adam’s points here. Higher fuel costs just means emptier pockets for the majority, with only minimally less usage. Well actually, probably increased usage just now as Local Authorities consider cutting their public transport services to save money, community transport associations struggle with voluntary sector cuts, and people are forced to commute longer distances from their homes to find decent work.
I think some of Ros’ points do ring very true though. It’s a great idea, but only if it can be backed up with a water tight economic policy to pay for it.
I suppose there may well be savings to be made by cutting current public spending in other areas that go against Green policy, but I would suspect that making the large scale improvements in public transport infrastructure and home energy efficiency measures needed to remove reliance on fuel will be at a huge cost, and voters will want to know how it can be paid without harming other areas of public services.
Once this transport infrastructure and support is in place, THEN its time to use the stick approach with higher fuel taxes to urge people to actually change their behaviour and use the damn thing. Until then, voters won’t buy the any proposed rises.
This is absolutely the way forward Adam, but it needs a superb comms campaign to convince the voters to invest in this as a priority, as right now people are, understandably, more concerned with the immediate issues being caused by all these cuts.
You’ve got my backing though.
Thanks for the comments guys,
Ric and Lisa, thanks – spot on.
Chas, you didn’t answer Lisa’s point – transport costs aren’t just about people who buy fuel. They are about people who buy anything which has travelled. Ie, everyone.
Also, Yeah, I accept that heating and petrol are different, and I agree that this is more important with heating fuels. But that doesn’t mean it isn’t true for petrol too. Sure, the very poorest aren’t hit as hard as people who re just poor, but that doesn’t mean tht it’s a progressive tax.
Kesh – I think we can’t possibly know what capacity there is for people to build a low carbon worl until we try. But David Macay may be right – I don’t know. However, if he is, then I think sequencing is crucial in this. Maybe we do need to put fuel costs up, maybe drastically. But if we do that before we’ve done the other things, then we will both ruin people’s lives, and in doing so, ruin any chance of maintaining political support for these sorts of actions.
Jos, what our economy needs now is massive (green) investment. I think it’s much easier to persuade people of that than it will be to persuade them that what it needs is for them to pay more for petrol.
On your Peru example, sure, maybe people coped. But carbon emissions per capita in Peru still went up in the 1990s:
http://www.google.com/publicdata?ds=wb-wdi&met=en_atm_co2e_pc&idim=country:PER&dl=en&hl=en&q=peru+carbon+emissions
And no one is advocating a 15x price increase in the UK, are they?
Ultimately, I agree that we need to find a way to restrict our fuel use, and that might mean price hikes – it probably will mean price hikes. But I don’t think that we should support a system that will screw millions if it doesn’t first give them a viable way to avoid the higher prices. That way, you are doing little for the climate, while clobbering people for a failure in the market.
Other comments:
Keshav – spot on. Except, as mentioned above, I think we should distinguish between home energy use and petrol/diesel. I think price support for the former is needed for health and equity reasons.
Lisa – the majority of lower-income groups don’t drive a car to work: they walk or use public transport (usually the bus). Reregulation of public transport to force down the cost of buses would do far more to help control the transport costs of lower-income groups.
Jos – I like your thinking!
Adam – if you don’t like ‘centrist Westminster thinktanks’ presumably you have the same view of Edinburgh-based sustainability campaign groups?
http://www.transformscotland.org.uk/cutting-fuel-duty-would-deepen-our-dependence-on-oil.aspx
You may not be confusing petrol prices with home energy prices Adam, but you’re certainly conflating them – see for example para 6, “Because travel (and heating our homes) are things we value…” My point is that the two issues are fundamentally different and should be approached differently.
For starters, as pointed out above, reducing (or stabilising) petrol prices and transferring the financial burden to general taxation is regressive: those driving cars tend to be wealthier, so reducing their payment relative to the general population has a regressive effect. The reverse is true of home energy use, especially for low-volume users, so there’s a strong argument for reducing the price of home energy especially at low consumption levels, for example through a rising block tariff.
Secondly, there’s a fundamental difference between heating your home and driving a car. If you can’t afford to do the former, your health will suffer (greater chance of a whole host of circulatory and respiratory diseases) and you’re more likely to die – there were more than 2,000 excess winter deaths in Scotland in 2009-10:
http://www.poverty.org.uk/s67/index.shtml
On the other hand if you can’t afford to drive a car, your health is likely to improve as you walk, cycle or use public transport more. Your chance of an early death recedes and your life expectancy increases. Also bear in mind that a substantial minority of car journeys are under 5 miles in length so lend themselves well to cycling or public transport instead.
I’m not arguing with your proposal that the solution includes massive investment in public transport, cycling and walking facilities: of course it does. But it also includes allowing the law of supply and demand to push up the price of petrol. Having a world-class public transport system is not enough if there’s no ‘push’ factor as well: Paris proves that.
I had always thought that carbon based fuel was cheaper than it should be since the negative externalities it generates, from extraction to emissions, are nowhere near close to being priced in. Taxes on them to fund less damaging sources of energy (and to finance reparations to people affected by extraction) would prevent petrol use from freeloading on the environment that makes it possible.
If feed in tariffs already do this, why not more taxes to make the price of petrol reflect the full cost of petrol? With the coalition as tax friendly as any political party, it rings hollow for them to suggest that its the Greens who have a tax agenda.
Don’t you run more of a risk by claiming that a Green new deal can be funded from the public purse and not at all through more taxes on petrol? Won’t that reinforce the view that the Greens are not economically realistic and prefer simply to paint the world they want to live in and not the road to get there?
In the current climate, how likely is it that public funding can be found on the scale needed for Green investment? We might all know that the fiscal problem is not as great as we are being told it is, that the economy is more feeble, and that there is a good case for boosting it through investment. But until the public is convinced, any scheme for improving home insulation is in a zero sum game with keeping libraries open and EMAs so I can’t see how that avoids splitting the anti-cuts movement.
How inelastic is the demand for petrol anyway? Witness the fujishock in Peru of 1990; overnight the the price shot up without warning over fifteen fold as the state ended massive subsidies. Aside from riots in which a handful were killed people got on with it and the government survived to win another term of office. I’ve no idea how much fuel use actually went down in Peru in the early ’90s or how much living standards dropped as a result but that might tell you a lot about the elasticity of petrol.
So the idea that increasing fuel price will just not have the desired effect could be on the money and I might be completely wrong in my outlook. Once I have a car I’m sure I will agree that I’m completely wrong in my outlook.
Hi- I dont have much time, but I wanted to say I agree with Adam.
Fuel duty prices DO hit the poorest and are. They are reflected in prices for everything, and in the cost of getting to and from work, and appointments. Fuel prices are really hitting hard at the moment and those who are already worst affected byt the current economic situation, are likely to be hit first.
Yes I think action on our dependency on oil needs to be taken, yes I think longer term we need to address this- but short term if you cant afford to fill up your car to go to work, and if the cost of food is going up to cope with fuel prices- then another thng that hits the very poorest hardest is really not going to help anyone.
I agree that right now, greens should emphasize policies to create jobs, better public transport, free insulation etc. rather than increasing fuel prices. I also agree that putting a price on carbon (e.g. using tradeable quotas) won’t be sufficient to transition to a green economy. But in the longer term, I don’t think it will be possible to cut CO2 enough without increasing prices in a way that hurts consumers.
David MacKay’s book tells me that if we switched to 100% renewables we could not sustain our current energy consumption level. Of course we should improve public transport, produce better insulated homes, maybe change the geographical distribution of homes and jobs, etc. so we consume less energy while consuming just as much of the stuff we like (transport, shelter). But I doubt this will be enough to cut energy down to the level we can produce from renewables. (This is a quantitative question – if you know of some analysis that suggests I’m wrong, I’d be pleased to read it!) So we need to consume less of the stuff we like. Assuming we still (sadly) have a capitalist mixed economy, this means the price of stuff we like needs to rise. This is true even once we have stopped using fossil fuels, but it is true a fortiori in an economy where fossil fuels are still being used. If I’m right in worrying that we can’t meet current energy consumption levels with renewables plus free public transport etc., then people will still consume fossil fuels unless the price of fossil fuel energy is much higher than the price of renewable energy.
To increase the price of fossil fuel energy we can use taxes or tradeable quotas. Personally I see no difference between them (if we introduce transfers from the rich to the poor alongside the carbon tax) so I don’t mind which we use. But either way will hurt consumers and make people unhappy. Politics is not my comparative advantage, so I don’t know how to frame this as part of a progressive political program that people will vote for.
Nice post Adam. It’s interesting in relation to discussions on fuel subisidies. Many poor countries subsidise fuels such as diesel, parafin etc. as a form of welfare to the poorest, but World Bank, IMF etc. policy guys have been insistent for decades that this is unwise as it gives the rich this welfare too, and creates unnaturally high demand.
The govt. loves to tax inelastic commodities as they are a highly dependable revenue source – but they are also for the most part /not/ luxuries, and as such these taxes are regressive. We should therefore oppose them. End of. Tax to oblivion if people it will stop people buying it. This is not the case with fuel.
Hi Chas,
no, I’m not confusing those things.
Sure, fuel price rises don’t hit the very poorest. But when the Tories define progressive by only looking at the impacts on the very poorest (eg tuition fees) we rightly slam them. Overall, fuel price taxes impact on the richest much less than they do on people with middle incomes, because of the relative value of money.
I’m not talking here about a fuel price stabiliser – though I am probably in favour of the revenue neutral version – I am talking about the fuel price escalator, due to kick in again in April (though it seems almost certain that George Osborne won’t let it go up). In general, I don’t think raising any tax apart from on the richest is a good idea until we are out of the economic woods – which we certainly aren’t yet. But once we do start raising taxes, some will be on the broader tax base, rather than on the richest. Why would we focus these rises on fuel, which is relatively regressive and does little for climate change, rather than on other, more progressive types of tax?
You’re confusing two issues Adam: petrol & diesel prices, where introducing a fuel duty regulator or cutting fuel duty would be deeply regressive (see for example Caroline Lucas:
http://www.guardian.co.uk/environment/blog/2011/mar/11/scrapping-fuel-duty-hurt-britain )
…and fuel poverty, defined as spending more than 10% of income on home energy use, where home energy efficiency investment and price support for the poorest would be both progressive and help us move towards sustainability.
Though of course the two are linked, because both petrol and home energy prices are linked to the price of oil, the solutions to the two problems are fundamentally different.
There’s also a fundamental difference between the two: fuel poverty is mostly suffered by those on low incomes, whereas high petrol / diesel prices fall predominantly on car drivers, who are much more likely to be wealthier: around 2% of social class A&B don’t own a car, whereas for DE it’s over 50%.
…which might also explain the relative prominence in the media of the two issues.
Well yes – the argument generaly works except that high fuel prices might be unpopular, but they don’t “ruin peoples lives”. Lives are ruined by impact with speeding vehicles and by chronic disease brought on by vehicle related air polution, and high fuel prices may impact positively on both of these aspects. Won’t the poltical aspects be more about a position on the merit of tax cuts for motorists as a public finance decision rather than on the power of tax inceases to change behavior? This is not quite the same as your arguments above
Actually, I think Adam’s point was that high fuel prices don’t reduce the number of speeding vehicles or the amount of air pollution. They do, however, ruin lives by impoverishing those who can’t afford to pay that much, but nevertheless have to as there is no alternative. Conversely, if we create alternatives, by insulating people’s homes or improving public transport, we will reduce fossil fuel use, and do it in a socially just manner.
Fantastic article Adam. This is going to be a really important issue over the next few months, and probably years, and it’s very important we have a clear and fair position that offer people alterantives rahte r than blaming them for the failures of the market.