Think-tank proposes green taxes to combat climate change

The UK’s tax system requires £150 billion worth of green taxes if the country is to play its part in curbing carbon emissions, it has been argued.

The package of business and household taxes, which include a charge on new cars and a tripling of fuel duties over the next ten years, was put forward by the government-sponsored Green Fiscal Commission (GFC).

Increases in carbon taxes would be offset by reductions in income tax and National Insurance contributions, the GFC’s paper said.

Based on a ‘polluters pay’ principle, the GFC report urged a fundamental rebalancing of the entire UK tax system.

Under its proposals, the proportion of overall government income from ‘green’ or environmental taxes would double to 15 per cent, the additional levies countered by corresponding cuts in business and personal taxation.

Specifically, the GFC report recommends a £300 tax on all new cars that would rise annually to £3,300 by 2020.

A fuel escalator charge would see petrol duties increasing by 10 per cent per year.

Gas and electricity taxes would also rise annually, the levies totalling 30 per cent of average electricity bills by 2020.

The report, the result of a two-year study carried out by the GFC, insists that eco-taxes, which are aimed at high-carbon activities, will safeguard the environment at a cost lower than other measures and will encourage job-creation – as many as 455,000 new positions – and investment in low carbon technologies.

The proposed shift towards a new green tax regime would, the GFC argued, be tax neutral in its final effects on both businesses and households.

Paul Elkins, professor of energy and environment policy at University College London and the author of the report, said: “This is not just about reducing emissions, but helping the UK to develop low-carbon competitiveness.

“This work suggests that it is possible to substantially reduce emissions and create jobs, which has to be an important message to policy makers at a time of rising unemployment.

“We know that a tax shift can be attractive to people, because it is effectively taxing a social evil, pollution, and people are much more supportive of taxes levied in this way.”

Professor Elkins went on to point out that a number of other countries in Europe have made more progress in cutting carbon emissions than the UK and have started to build the competitive, low-carbon businesses of the future that will be essential for exports and for domestic industries.

Although it has garnered interest on a cross-party basis, the report was criticised by the Freight Transport Association (FTA).

Jo Tanner, the FTA’s spokeswoman, said: “Our members use road, rail and sea where they can but the infrastructure is not there at the moment to make low-carbon alternatives more viable.”