Cost of electricity 'must rise 15% to fight global warming'

Electricity bills and petrol prices should rise by more than 10 per cent to force homeowners and motorists to contribute to the cost of fighting global warming, Britain's premier scientific body recommends today.

Electricity bills and petrol prices should rise by more than 10 per cent to force homeowners and motorists to contribute to the cost of fighting global warming, Britain's premier scientific body recommends today.

The Royal Society said that the climate-change levy on businesses, which has been criticised for penalising manufacturing industry, should be replaced by a wider carbon tax that covers households and motorists.

Electricity bills would rise by about 1p per kilowatt-hour and a litre of petrol would cost an extra 6p if the Royal Society's recommendations are accepted by the Government, which is expected to publish a White Paper on energy before the end of the year.

The rises would add nearly 10 per cent to a litre of petrol and 15 per cent to an average annual electricity bill of £250, according to a spokesman for the power industry.

The report by the Royal Society into ways of controlling carbon dioxide emissions says the Government's climate-change levy is too crude because it penalises the use of energy by industry alone rather than the release of carbon dioxide from all sources.

"The climate-change levy is not a cost-effective way of reducing the carbon dioxide that is pumped into the atmosphere, as it is a tax on energy and not greenhouse gases," said Sir Eric Ash, who chaired the Royal Society committee.

"Moreover, the levy does not apply to the use of fossil fuels by households and transport, and penalises electricity sources that do not produce greenhouse gases," he said. Business leaders have also criticised the climate-change levy because they believe it unfairly penalises industries that have to use a lot of energy, such as manufacturing, while allowing those with larger workforces who have done nothing to improve energy efficiency to benefit from lower national insurance contributions.

Britain is committed to reducing emissions of carbon dioxide under the Kyoto treaty on climate change but the Royal Society says that it is not clear how its existing levy to reduce energy use will work beyond 2010.

It says it should be replaced by either a direct tax on all carbon dioxide emissions – effectively a rise in electricity and petrol bills – or a system of "tradable permits" which allow companies to emit a given quantity of greenhouse gases.