(Bloomberg) -- Britain should place higher taxes on natural gas than power to spur the country’s shift to a low-carbon economy, according to UK Energy Secretary Grant Shapps.
The UK has long relied on gas for domestic use, helped by a reduced rate of value added tax on the fuel and an established infrastructure. The government however wants people to shift from fossil-fuel boilers to electric heat pumps, where uptake of the lower emission technology is among the worst in Europe.
Changing the system would require levies to move “onto the gas side of things because it would automatically make the economics of an electric-driven economy better,” Shapps said at a briefing on his Energy Security plan.
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The country aims to make “significant progress” toward re-balancing gas and electricity prices by the end of 2024, including by decoupling gas from electricity costs. It will run consultations on how best to do this.
Shapps was speaking as the UK unveiled its wide-reaching energy strategy that included plans to expand a home energy efficiency program as well as more investment in electric vehicle charging points and heat pumps. While long on ambition, the plan offered little in the way of new spending.
The government has already pledged £450 million ($557 million) to help people upgrade gas boilers to heat pumps in order to meet a target of 600,000 new fittings each year by 2028. If installed at the same rate as Norway, one of Europe’s leaders in heat pump sales, the technology could displace 70% of UK domestic gas usage by 2032, according to analysis by the Energy and Climate Intelligence Unit think tank.
--With assistance from Celia Bergin.
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