Household energy efficiency in the UK*

Over the past three years, policy towards the taxation of energy has been debated vigorously. In 1991 the European Commission proposed a new carbon/energy tax as part of a package of measures intended to reduce energy use and to help the Community meet international targets for reducing emissions of carbon dioxide and other $lsquo;greenhouse gases’. This would have applied to both domestic and industrial users of energy and motor fuels. Also, in the area of UK domestic policy, the Chancellor’s 1993 Budget announced the phased extension of the standard rate of value added tax to domestic energy, which had hitherto been zero-rated in the UK. The extension of standard-rate VAT to domestic energy was primarily motivated by the need for increased tax revenues, but, at the same time, the Government maintained that the measure would have the valuable byproduct of reducing energy consumption, and hence contributing to achievement of targets for reducing greenhouse gas emissions.