UK to consider industrial energy taxation

ENDS Environmental Daily
March 17, 1998

The UK holds the Presidency of the Council of Ministers of the European Union (Jan - June 1998)

The UK government is to consider whether economic instruments "such as an energy tax" should be introduced to reduce industrial and commercial energy use and carbon dioxide emissions, UK finance minister Gordon Brown announced today as part of the country's 1998 budget.

Any generalized tax on energy use in industry would mean a major expansion of UK energy taxes, which presently fall almost entirely on motor vehicle fuels. Industry and commerce emit about one third of national carbon dioxide emissions, which the government has unilaterally pledged to reduce by 20% by 2010 irrespective of legal requirements taken on under the UN Kyoto protocol.

"There has been increasing pressure, not least from businesses themselves, for measures that encourage greater energy efficiency in industry," Mr Brown said during his budget speech in parliament. He did not give a timetable for the independent policy review, which is to be headed by the chairman of British Airways.

Another environmental highlight of the budget was the introduction of differentiated vehicle excise duty to favor cleaner cars. From next year, the annual license fee on "the cleanest and smallest" cars is to be cut by UK£50 (Ecu66) or about one third of the standard rate. Annual license fees for "clean" lorries and buses is to be cut at the same time by "up to £500".

Other measures include an additional investment of £500m over the next three years to improve public transport and a £50m per year rural transport fund. Motor fuel prices are also to be raised in line with the government's commitment to an annual tax increase of 6%. Ultra-low-sulphur diesel and unleaded petrol will qualify for the lowest tax rates, while the tax rate for road fuel gases has been frozen.

The UK's landfill tax is to be differentiated between active and inert wastes, Mr Brown announced, with the tax on active waste to be raised from £7 to £10 per tonne while inert waste used in the restoration of sites will be exempted from the charge.

However, decisions which had been expected on water pollution charges and a tax on quarrying of minerals were postponed pending further consultations.

Early reactions to environmental measures in the budget have been mixed. The UK's main industry association said differentiation introduced in taxes on waste and vehicles were welcome but sounded a note of concern over the prospect of taxes on industrial energy use. Environmental groups have been far harsher. The budget was "not much greener than a smog alert," said Friends of the Earth, which accused Mr Brown of failing to keep to earlier promises to "put the environment at the heart of government".

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