Green taxation

Green taxes are supported by all three political parties as a way of influencing consumers to reduce their impact on climate change and pressure on global resources.  Green taxes involve making enviromentally unsound products and services (e.g. car and air travel) more expensive, thereby making ‘green’ options more attractive.  Although controversial, green taxes remain high on the policy agenda and were recommended as one of the ways to tackle climate change in the Stern Review.

A number of key factors may drive the further emergence of ‘green taxation’ over the decade ahead. These include evolving national and international environmental targets and ‘binding’ commitments; replacing an aging domestic energy infrastructure; and meeting revenue generation needs in order to fund alternative energy systems. Varying estimates suggest that such taxes could “treble by 2020” at a cost to the taxpayer of £16 billion per year [1] or be worth the equivalent of approximately £400 extra per year on the average household electricity bill [2].

What are the implications?

  • The potential to reduce greenhouse gas emissions and ease pressure on global resources if green taxes cause the desired behaviour changes.
  • Growth in ethical living and consumerism as ethical choices become easier to make.
  • Growing markets for energy efficient products.
  • Possible reduction in migration if the cost of air travel rises.
  • Possible rise in homeworking and teleconferencing to reduce travel.
  • Possible counter trend to falling costs of ICT if technologies become more expensive.
  • Risk of deepening inequalities if those on lower incomes are unable to afford energy efficient products.
  • Ongoing debate on fuel duties, including fuel price stabilisers.
  • International targets and commitments may lead to new challenges to individuals and organisations.

Moving forward

Green taxes can have a direct cost implication to organisations.

  • Are green taxes increasing your costs? Are there changes you can make to your policies that would reduce these costs, as well as your environmental impact?
  • Could you reduce long distance travel for meetings or encourage the use of trains?

Green taxes put the emphasis on individual and organisational action to reduce their impact on the environment.  In addition, there is increasing pressure from funders and the public for organisations to be environmentally sustainable and responsible.

  • Does your organisation understand the impact its services and practices may have on the environment?
  • Do you have the reporting systems in place to demonstrate and communicate your environmental impact?
  • Could you invest in an eco-audit of your services?

Want to know more?

State of the Environment

Published by: Environment Agency

Date: Ongoing

Format: library of PDF reports

What is it?  An extensive library of reports concerning the environment in the UK. It is divided by region, then subdivided by topic.

How useful is this? This site provides more than many readers will need for a brief review of green taxation. However, it would be a valuable resource for anyone making a more detailed analysis of environmental issues.

Briefing: Fuel prices, transport and climate change

Published by: Friends of the Earth, campaigning organisation focused on environmental issues

Date: Jan 2011

Format: PDF

What is it? A five page briefing on fuel prices, including a short discussion of fuel price stabilisers and discussion of the relationship between transport and climate change.

How useful is this? This briefing is prepared by a campaigning organisation and as such reflects their aims. However, it provides a short summary of the key issues involved in the debate over fuel prices and links to relevant data from other sources.

Public Engagement on Aviation Taxes

Published by: Loughborough University for the Sustainable Development Commission

Date: 2007

Format: PDF (158.6KB)

What is it?  A research paper examining the arguments around the acceptability of current and potential future aviation taxes.

How useful is this? This paper provides interesting insights into attitudes towards aviation taxes, as one form of green taxes.  Using qualitiative research methods it examines: attitudes to the environment; environmental issues associated with aviation; measures to reduce aviation emissions; acceptability and attitudes towards existing aviation taxes; measures on which to spend any additional revenue from aviation taxes; possible future tax and charging systems for aviation; and likely behavioural response to price signals.

Green Tax Report 2009

Published by: CIOT (The Chartered Institute of Taxation)

Date: 2009

Format: Web or PDF

What is it?  An in-depth report examining what we understand by green, or environmental taxes, the differing characteristics of these taxes and what needs to be done in order to instigate a movement of change based around them.

How useful is this? This report, using the Stern report as a backdrop, initially looks at the economics of climate change and putting forward policy change recommendations focussed around increased regulation, information and financing.  It goes on to discuss the rise of environmental taxation, its various incarnations and how they are perceived by the public.  It looks at revenue, effectiveness and compliance levels of taxes already in operation (in both the UK and other developed countries) and touches upon what changes are likely to happen in the near future.  This report is particularly useful for those wanting a broad yet detailed overview of the economic characteristics of environmental taxation, as well as an indication of where government policy currently stands and where it is likely to move in the future.

Other comments: The report can be read in its entirety online here, including a response paper by KPMG.


  1. Green Bills: An analysis of the projected policy levy in energy bills - Policy Exchange, 2010 [back]
  2. Why electricity bills may go up with or without Huhne's reforms - Westminster Blog, 2010 [back]
Last updated at 14:42 Fri 25/Mar/11.

Recent comments

Joh's picture


Green taxes put the emphasis on individual and organisational action to reduce their impact on the environment. In addition, there is increasing pressure from funders and the public for organisations to be environmentally sustainable and responsible.

It seems clear to me that despite 'emphasis being put on individuals' it really is companies responsibility to ensure that savings are made so green taxes could be paid. At present people seem to not have a great deal of money just left around to be taxed on another tax...

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