Green taxes: what and why?

The subject of green taxes has been a contentious one of late, with the media dominated by the debate over reducing those all-important energy prices. Political parties have been throwing ideas around on how to slash prices and for the average household, this can all be a bit confusing. To make it slightly simpler, here’s what you need to know about the infamous climate change policies.

Interest has sparked following the Prime Minister’s recent announcement of a well needed review into the government’s climate change policies; how the green levies (or green taxes) affect bills and whether they’re delivering value for money.

The average household bill in the UK has been estimated at around £1,267 for 2013. The cost is made up of various contributors, and the green measure takes up only 9% of that cost (the equivalent of £112).

The increase in household gas and electricity costs, which so many people are disgruntled about, is in fact due to a number of factors. Wholesale energy costs have contributed to 60% of the increase since 2007, network costs, supplier operating costs and margins contributing 25% and energy and climate change policies only 15% of the increase.

So what are these green taxes and why do we have to pay them? There are currently a number of policies in place, aimed at encouraging a greener way of living and working, to improve the current climate situation and to ensure a secure energy supply in the future.

A common resentment amongst households are the Feed-in-Tariffs, which are used to supplement renewable energy projects like wind turbines.  However FiTs only contribute to 1% of energy bills, a fraction compared with other factors.

Green levies have a bad reputation, but there are in fact a great number of policies in place which have been introduced over the past decade; some of which cost people money, some which save people money and some which do both. The government says that by 2020, the cumulative impact of green taxes will help save the average household 11% of their energy bills.

Although they may seem like an unnecessary additional cost to the average household, the aim of green taxes are to improve the current and future state of the environment and in the future, help reduce energy bills.