Government urged to remove the 5% VAT on Green Energy Tariffs

Through the Queens Speech, the Government outlined its plans to reduce energy wastage in the UK over the next five years. The climate change bill will seek to reduce Britain’s carbon dioxide emissions by as much as 60% by 2050.

uSwitch.com, the independent switching and comparison service, believes that if the Government is serious about its proposals, it needs to take immediate action to place green energy firmly on the map. Removing the 5% VAT on Green energy tariffs would make these more attractive to consumers and encourage take up.

Currently, the UK is behind its carbon emission targets and is likely to fall between 2-5% short of its 2010 target for reducing Co2 by 20% - making the need for further initiatives to promote awareness and increase take - up more important than ever.

The Stern Review emphasised the urgent action required to combat global warming and the Government has outlined to energy suppliers the need to improve the information contained on customers’ bills. Better billing practices could act as an incentive to boost demand for green, renewable energy.

Research by uSwitch.com revealed that the public is on board with the ideals of using greener energy. Customers in the UK ranked tackling climate change as the single most important issue to them as energy customers. Indeed, improving energy efficiency also ranked higher than ensuring that future prices remained low. This was reinforced by 86% of people believing that greater investment in renewable energy was paramount and 85% would be prepared to have new wind farms built in their local area.

However, when it comes to paying extra to help achieve a reduction in carbon emissions, only one in three (31%) wouldn’t want to have to pay any extra on their energy bills and a further 47% would only pay up to £50 more.

Ann Robinson, Director of Consumer Policy at uSwitch.com says: “Increasing the awareness of global climate change is one thing, persuading consumers to change to their behaviour is another. The onus is on the energy providers to educate consumers about green products and it is up to the Government to incentivise the continued investment in renewable energy by the biggest providers.

“uSwitch.com is calling for the Government to remove the 5% added VAT from Green tariffs to encourage greater take up. If that were to happen, Green energy products would become on average £7 a year cheaper than standard fuel tariffs and we as a nation could begin to combat global climate change.

“We all have a role to play in combating the degradation of the environment, but we have to change people’s mindsets, we can only achieve this by providing consumers with viable alternatives that will not adversely affect their pockets. Reducing the annual cost of going green to bring it into line with standard tariffs should see an increase in take up, which in turn should stimulate demand for renewable energy and the development of low-carbon technologies.”

Climate Change – The Facts

The annual flow of carbon emissions is accelerating at a rapid pace. The level of 550ppm Co2E could be reached as early as 2035. At this level there is at least a 77% chance of global average temperature rising by 2? C.

Ecosystems will be particularly vulnerable to climate change, with an estimated 14 – 40% of species potentially facing extinction if temperatures increased by 2? C.

The stock of greenhouse gases could more than treble by the end of the century- this means we would face at least a 50% risk of exceeding 5? C global average temperature change. An illustration of the scale of such an increase is that the planet is now only 5? C warmer than the last ice age.

With global warming of 4? C, global food production is likely to be seriously affected.

According to one estimate, by the middle of the century, 200 million people may become permanently displaced due to rising sea levels, heavier floods, and more intense droughts.

The UK has just 1% of the world’s population yet it produces 2.3% of the world’s CO2, with more than a quarter (27%) of these carbon emissions coming from UK homes. The average household currently spends about 10% of their electricity bill on appliances that they are not even using . Up to twelve gadgets are left on standby or charging at any one time, which emit four million tones of excess CO2 emissions a year and waste more than £740 million annually.

Despite this apparent lack of energy efficiency, a recent survey revealed that consumers do take a keen interest in the issues surrounding global warming and climate change. 80% of consumers were interested in knowing where Britain’s energy will come from in the future, with people greatly in favour of renewable energy sources.

uSwitch.com believe general reluctance to actually make the switch to green energy may be due to pricing. Since the end of 2003 consumers have fallen foul to huge energy price hikes with their gas bills soaring, by £298 or 87% while electricity bills have risen by £142 or 58%. With these huge rises and the strain this has placed on household incomes it is no surprise that people are resistant to switching. However, green tariffs are becoming increasingly competitive and affordable, yet just 200,000 consumers or 0.33% of the UK population have signed up to renewable energy.

Robinson concludes, “The consumer uptake of renewable energy products is still too low. The UK is behind many of our European counterparts for emissions. The Netherlands provided tax breaks on renewable energy products to incentivise uptake - there is no reason why the UK Government cannot take the same measures.

“Consumers are still heavily focused on price, and as such, they approach renewable energy products with caution. We would like to see the Government take positive action to increase the prevalence of green and renewable tariffs therefore stimulating take up.”

Consumers wanting to switch to a 100% percent renewable energy tariff should consider a move to a green energy supplier, such as Ecotricity or Good Energy. Others may prefer to stick with one of the UK’s leading suppliers but sign up for the green option.