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Wednesday, November 01, 2006

Reader : tax based on wattage x life time of product
Eduard has been in touch from Spain to suggest a fair and logical way of calculating the appropriate level of tax which should be applied to any energy using products, based on the wattage and expected lifetime of the product in question...

Dear Matt,

I've been thinking about the fact that the problem to be tackled is an "up-front cost" one. From that side, the only way to smooth the up-front cost of a CFL versus an incandescent bulb is by incorporating the full-life cycle cost in the price. At present we have a good example of market failure.

I think it would be more equitable to calculate the appropriate level of tax that should imposed on an electricity using product according to all of the carbon emissions generated by a device during its life-cycle. That is,

bulb estimated life : 1000h
consumption : 100W
makes 100kWh.

CFL estimated life : 6000h
consumption : 20W
makes 120kWh.

Considering the fact that you'll need 6 incandescent bulbs, over time that adds 600 vs 120. This plays against taxing just for the sake of it.

I've recently read the following Market Transformation Programme article (

The scenarios remain crystal clear albeit the taxation appears to me a bit arbitrary. Why 50p, and not 30p? or 72p?

The mechanism I have suggested based on lifetime emissions would drive people to get the least consuming device they needed.

It could also be applied to some sort of mathematics linked to the price of the emission of CO2. Therefore, the measure could be more easily "translated to average Joe".

It could be tricky if every product had to have a different tax rate, but perhaps bands could be created with tax deductions being made for the more energy efficient products... BTB is already advocating that energy saving goods and services should have a reduced level of VAT, similar to the 5% granted to condoms in the last budget.