A Sad Day For London

Well, technically it's not. True road-pricing would charge per distance travelled. Like motorways in France.

The C Charge is a one-off charge, which is a regressive tax, and provides an incentive to drive more once you have paid the charge. Road-pricing would make more sense, as more miles travelled = higher tax. However, this is technically a very hard tax to enforce at local level, as it requires tracking of vehicle movements - probably via GPS and chipped vehicles.

But the best tax of all, if your aim is to reduce petrol consumption, is a tax on fuel.

Oh wait, we had one of those - and it was sunk by lorry drivers and their mates. Anyone with an eye on the proven reserves of oil companies and OPEC will know that the price of petrol is only going to go one way - ever increasing demand + limited and falling supply = higher prices. OK, there may be some evidence that the current price is being driven by some speculative trading, but the long view is that there is only so much oil in the ground. So a government that encouraged its economy with incentives to use less fuel now, before the price goes to $200/barrel, would be doing everyone a favour. But was the public encourage to see the big picture? No, instead we were subjected to a lot of nonsense about how petrol is essential, that people's livelihoods depend on cheap petrol etc. Of course, the economy, as currently configured, depends on cheap petrol. All the more reason to make radical changes now, while we still can.

Green taxes have poor credibility right now. Look at the fuss over rubbish charges. People hate them. The principle is clear, land-fill is a limited resource, and consumers need to produce less waste if we are ever to get to grips with the problem. But how to encourage them to do so? Education is good, but taxes do change behaviour, if they are correctly framed.

Technically you're right on the road-pricing, but in the absence of tracking it was a policy with a similar objective that had an appreciable effect on the level of congestion in London. In Singapore (where I grew up) they had quite a good system for charging for city use, but politically I don't see tracking being easy to introduce here - I mean, this is a country in which speed cameras have to be announced in sufficient time for you to be able to slow down to the legal limit!

Re. the commodities markets - it's not just speculation (which is hard to measure) but also a function of weakening currencies - nominal gains in dollars (and pounds, increasingly) are more dramatic than the nominal gains in oil prices in euros. Which is partly a function of our weakening economy. There's a bit of a feedback loop, actually, as traders have been using commodities as a way reduce their exposure to currency depreciation. Anyway, enough commodities mkts stuff.

What's interesting to me is that Japan responded to the OPEC price shocks of the previous generation by reducing the energy intensity of their economy dramatically, while the US didn't. Japan uses about 25pc less energy than the US per unit of GDP produced - and that's after they slowed down a bit during the late 1990s when oil was dirt cheap.

The UK is quite good in terms of the energy intensity of the economy, but you're right that we could do more. One thing that would help dissuade people from driving so much is if we didn't intervene to keep down fuel prices, but left people exposed to the market. That'd force them to adapt by consuming less fuel. I find it incredibly ironic that the people most averse to this idea are generally against government intervention in the economy...