Definition of environmental tax published
The government has today published its definition of environmental taxes.
The government has today published its definition of environmental taxes. The definition is designed to encourage effective policy making, and also measurement of progress against the Coalition Agreement pledge to increase the proportion of revenue that comes from environmental tax.
Environmental taxes are defined as those which meet all of the following three principles:
- the tax is explicitly linked to the government’s environmental objectives
- the primary objective of the tax is to encourage environmentally positive behaviour change
- the tax is structured in relation to environmental objectives, for example: the more polluting the behaviour, the greater the tax levied
Applying these principles, the Treasury has identified the following taxes as environmental, and these will comprise the baseline against which the government’s commitment to increase the proportion of environmental tax revenue will be measured.
The independent Office of Budget Responsibility currently forecasts the proportion of revenue from these taxes doubling by 2015-16.
- Climate Change Levy
- Aggregates Levy
- Landfill Tax
- EU Emissions Trading System (EU ETS)
- Carbon Reduction Commitment Energy Efficiency Scheme
- Carbon Price Support
Announcing the definition, Economic Secretary to the Treasury Chloe Smith said:
Today’s announcement is an important step in meeting the government’s commitments on environmental tax, and our broader determination to be the greenest government ever. By setting out a clear, usable definition of what a green tax actually is, people will be able to judge us against the Coalition Agreement pledge. Indeed, through ambitious policies such as the Carbon Price Floor, this Government is already on track to double the proportion of environmental tax revenue by the end of the Parliament.
We want a clear approach that delivers a positive environmental impact without adding burdens onto business or households.
The government will also continue to explore opportunities to further green the tax system through the course of the Parliament in a way that is consistent with the aims of tax simplification and deficit reduction.
Notes for Editors
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The government recognises that other taxes can deliver environmental benefits, but their aim is not environmental but revenue raising. These are specifically excluded from the Treasury definition and include taxes such as Vehicle Excise Duty, Fuel Duty and Air Passenger Duty.
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The Coalition Agreement pledged to increase the proportion of revenue raised from environmental taxation by the end of this Parliament. This definition will provide a baseline against which to measure delivery.
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At Budget 2012, the Office for Budget Responsibility forecast revenue in the coming years from the taxes included in the definition as below:
| Tax | Actual Revenue Raised 2010/11 | Actual Revenue Raised 2011/12 | Revenue Forecast 2012/13 | Revenue Forecast 2013/14 | Revenue Forecast 2014/15 | Revenue Forecast 2015/16 |
| Climate Change Levy | £0.7bn | £0.7bn | £0.7bn | £0.7bn | £0.7bn | £0.8bn |
| Aggregates Levy | £0.3bn | £0.3bn | £0.3bn | £0.3bn | £0.3bn | £0.3bn |
| Landfill Tax | £1.1bn | £1.1bn | £1.1bn | £1.2bn | £1.5bn | £1.6bn |
| EU ETS | £0.4bn | £0.3bn | £0.7bn | £1.5bn | £1.6bn | £1.7bn |
| Carbon Reduction Commitment | 0 | £0.7bn | £0.7bn | £0.8bn | £1.0bn | £1.0bn |
| Carbon Price Floor | 0 | 0 | 0 | £0.6bn | £1bn | £1.2bn |
| Total | £2.5bn | £3.1bn | £3.5bn | £5.1bn | £6.1bn | £6.6bn |
| 2010/11 | 2011/12 | 2012/13 | 2013/14 | 2014/15 | 2015/16 | |
| Total Revenue from Environmental Taxes (£bn) | £2.5bn | £3.1bn | £3.5bn | £5.1bn | £6.1bn | £6.6bn |
| Total Tax Forecast Receipts (£bn) | £550.8 | £570.4 | £591.5 | £622.5 | £658.4 | £692.0 |
| Proportion of total tax receipts | 0.5% | 0.5% | 0.6% | 0.8% | 0.9% | 1.0% |
| Environmental Impacts from Budget 2012 announcements by year | ||||||
| Impact from Budget 2012 (already included above) | 0 | 0 | -£15m | +£60m | +£30m | +£30m |