Budget 2008: even limper than expected green measures

Today’s budget was pretty limp (or in Willem Buiter’s words, like being beaten over the head with a sweaty sock). It had been billed as the budget that would deliver big green taxes to fill a hole in the public finances. In the event the environmental announcements were all minor, and the campaign groups were unanimously unimpressed.

A plastic bag tax was threatened, vehicle excise duty will be reformed to penalise inefficient new cars, air passenger duty will rise by 10% from 2010 and the Climate Change Levy (a tax on energy use for institutional consumers) will rise with inflation. The biofuel differential will end (following now mainstream concerns about the sustainability of biofuels).

Tim Harford notes that the reformed vehicle duty will discourage people from buying new inefficient cars, but might not necessarily reduce emissions. It might mean that people drive old, even less efficient cars instead. There was no unambiguous pricing of greenhouse gases in the budget, and that is what we need – clear price signals.