Report set to recommend green taxes

A two-year study by the independent Green Fiscal Commission found eco-taxes targeted at high-carbon activities can protect the environment at a lower cost than other measures, while promoting growth creating employment in low-carbon industries.

By shifting tax onto high-carbon activities like driving and energy use and cutting taxes on low-carbon activities and levies like National Insurance, the Commission argues it is possible to produce a new green tax framework that is neutral overall in terms of the total burden on taxpayers.

The report does not include a specific package of recommendations for action, but models a variety of options for an eco-tax system of the future.

The most stringent models examined are understood to envisage additional taxes of as much as £3,300 on a new car and a tripling in fuel duty, but a source close to the Commission stressed that these were options, and not favoured proposals.

The source stressed that any package would have to include measures to protect the poor: "For the green fiscal reform to be fair, low-income households would need to be protected while improvements are made to their homes to make them more energy efficient."

"This is not just about reducing emissions, but helping the UK to develop low-carbon competitiveness," said Green Fiscal Commission Director Paul Ekins, professor of energy and environment policy at University College London.

"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."

Polling ahead of the report showed "clear public support" for green taxation, said the Commission. The UK's 2020 greenhouse gas targets could be met by imposing green taxes with a broadly neutral economic impact, and investing a small proportion of the proceeds in energy efficient homes, cars and renewable energy schemes would reduce emissions further at virtually no cost, said the report.

Robert Napier, the Green Fiscal Commission chair, said: "This report adds the numbers to an issue that has frequently been discussed in more general terms. It shows that green fiscal reform could help put the UK on a low-carbon track and from that many positives will flow: reduced greenhouse gas emissions, extra employment, and new technologies which will help the UK economy all round."