What are Environmental Taxes?

Environmental taxes, also known as green taxes, pollution taxes or ecotaxes, are a wide range of legislative charges on businesses and private individuals, aimed at reducing practices which cause damage to the environment. There are many forms of environmental tax, some of which are aimed at penalising those who emit harmful chemicals and some of which are aimed to rewarding those who employ environmentally-friendly practices.

Though there is a wide variety of this type of tax, all are aimed at helping Britain reach its goal of cutting harmful emissions by 80% by the year 2020, and garnering more energy from sustainable, green means.

Types of Environmental Taxes

• Industrial pollution taxes. Because industrial companies are often responsible for producing a significant amount of pollution but are not the sole sufferers of the pollution (the surrounding area and local environment suffer, instead), taxes must be placed on the amount of harmful emissions they produce. This can take the form of a carbon tax, which places a levy on the carbon-based content of fossil fuels in use at any particular industrial facility. It is a common practice in much of Europe, Australia and, as of 2010, India as well.
• Individual revenue-based taxes. These taxes are also aimed at curbing behaviour and practices which can damage the environment, but are aimed primarily at private individuals rather than big business and industry. They can take the form of congestion charges, other vehicle taxation or increased gasoline tax. Though they may not be popular policies in the short-term, history has shown that they can pay off. For example, the London congestion charge has reduced traffic on the roads by 30% and CO2 emissions have fallen by 20% since its inception.
• Incentivised taxation. This type of taxation can apply both to industrial and domestic spheres and works in a contrary manner to the two types outlined above. Instead of castigating people for producing too many harmful gases, it rewards them for employing practices designed to help the environment. For example, subsidised solar panel implementation and a reduced tax rate thereafter encourages home-owners and business-owners alike to pursue sustainable methods. However, there is a small danger that such methods could encourage more people to pollute, albeit less each. The lessened amount of pollution that each is producing is offset by the increased number of polluters – as such, it needs to be rigorously monitored.

Environmental Tax Today

Though the UK is striving towards stringent targets set both by itself and demanded by the EU, under the incumbent government a focus has been moving away from green energy. The Conservative Party have often aired their view that such controls are hampering businesses from expanding and have sought ways around the problem. For example, in 2012, the Chancellor of the Exchequer George Osborne mooted the idea of introducing lessened environmental taxes in place of carbon-reduction plans.

However, this year, the signs are more encouraging. Guernsey’s tax, pension and benefits framework has come under scrutiny, and an increased emphasis on environmental taxes has been proposed by current Environment Minister Yvonne Burford.

“Environmental taxes currently make up approximately 2.9% of the total tax and social contributions income. For comparison, the EU average is 6.2%, with some countries at 10%. The substitution of environmental taxes for other taxes would assist the stated aim of diversifying the tax base,” explained Burford in the most recent developments on the debate.