British businesses will lose out to European rivals unless Chancellor George Osborne uses his Budget to scrap plans for a unilateral carbon tax, Tim Yeo, the Conservative chairman of the Energy Select Committee, has warned.
Mr Osborne is this week expected to reveal an increase in the “top-up” tax faced by UK power generators for their carbon emissions under the Carbon Price Floor, meaning British business could face significantly higher costs than those in Europe.
Mr Yeo called on the Chancellor to “reduce the burden on businesses by scrapping faux-environmental taxes like the Carbon Price Floor, which won’t cut greenhouse gas emissions but could result in industry and electricity production moving to other EU countries”.
The Government risks another energy policy “fiasco” such as that seen on feed-in tariffs unless it is “open about the effects of the difference between UK prices and what everyone else in the EU pays”, he said. Mr Yeo’s committee warned in January that “exorbitant” top-up taxes could have a “devastating effect on UK industry”.
The UK’s unilateral Carbon Price Floor is due to come into effect next year.
The Treasury declined to comment on likely increases.