CBI calls for overhaul of government policy on environmental taxes

12 Mar 2021

The Confederation of British Industry (CBI) has urged the government to overhaul its policy on environmental taxes to help the UK get back on track to reach net-zero.

In a new report, the CBI stated that the scale of climate challenge and the delivery of the government's plans for a green industrial revolution call for innovative ways to use the tax system.

It said that fiscal measures, including environmental taxes and tax incentives, will be important levers in driving change. They can work to discourage damaging environmental behaviours (e.g. emissions taxation); incentivise investment in both the acquisition of and research and development into environmentally friendly products (e.g. Vehicle Excise Duty, Research & Development (R&D) tax credit) and energy efficiency (e.g. capital allowances and reduced VAT rates).

Within the report, the CBI suggested that tax and regulatory systems are considered holistically and analysed to outline how each element drives the delivery of net-zero. It highlighted a number of principles, including international co-operation, green technologies and greenhouse gas hierarchy, to be used in tax policy design and when reviewing existing policies.

The business group commented: 'Government needs to provide long-term certainty of environmental tax policies to underpin the investment decisions by consumers and businesses; the use of carrots and sticks by the government should be balanced to drive change.'

The CBI's report can be found here.