PolicyLens

Methodology note

Abolish carbon taxes and CBAM: calculation note

Scenario assumptions behind the Abolish carbon taxes and CBAM estimate. The figures are illustrative and exclude unrelated Conservative pledges.

View main policy page: Abolish carbon taxes and CBAM

Central fiscal result

+GBP 3.0bn - Net fiscal impact in 2028-29

Low case: +GBP 1.5bn. High case: +GBP 6.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Model repeal of selected carbon pricing by 2028-29.
  • Central cost is GBP 3bn lost receipts.
  • Baseline includes ETS and environmental receipts context.
  • ZEV mandate and household VAT are separate policies.

Affected population

  • Affected population is firms and households paying carbon-related costs.
  • Direct beneficiaries include energy-intensive industries and fossil-fuel consumers.
  • Indirect exposure includes clean-tech investors and future taxpayers.
  • CBAM effects depend on trade coverage.

Gross impact

  • Central lost receipts: GBP 3.2bn.
  • Lower business costs may raise other receipts by GBP 0.2bn.
  • High case assumes broader repeal of environmental receipts.
  • Future emissions costs are not fully monetised.

Fiscal build-up, central case

  • Lost carbon-pricing receipts: +GBP 3.2bn
  • Higher other tax receipts: -GBP 0.2bn
  • Administration savings: GBP 0.0bn
  • Future compliance costs: GBP 0.0bn

Central net impact: +GBP 3.0bn in 2028-29.

Behaviour and pass-through

  • Low case assumes narrow repeal and some pass-through.
  • Central case assumes broad but incomplete carbon-pricing repeal.
  • High case assumes wider environmental receipts are removed.
  • Emissions rise unless alternative policy replaces price signals.
  • Clean investment may fall more than direct fiscal cost implies.

Phasing

  • 2026-27: +GBP 0.6bn. Preparation or partial implementation.
  • 2027-28: +GBP 2.4bn. Main ramp-up year.
  • 2028-29: +GBP 3.0bn. Target-year central estimate.
  • 2029-30: +GBP 3.0bn. Continuation at steady-state assumptions.

Main source groups

  • con-plan-2026: Conservative live policy page; used to identify current pledge wording.
  • obr-efo-oct-2024: OBR October 2024 forecast; fuel-duty, energy and oil-gas receipts.
  • hmrc-ready-2025: HMRC tax ready reckoners; main tax-cost anchor.
  • obr-efo-mar-2026: OBR March 2026 forecast; fiscal and macro baseline.
  • andersson-2019: Carbon tax evidence; informs behavioural and incidence assumptions.
  • goulder-parry-2008: Environmental policy design; informs behavioural and incidence assumptions.
  • dechezlepretre-sato-2017: Regulation and competitiveness; informs behavioural and incidence assumptions.