Using the tax system to help combat climate change

12 Dec 2018

The Association of Chartered Certified Accountants (ACCA) recently urged governments to ‘rethink the design of the tax system holistically’ in order to help combat climate change. The ACCA also stated that it is necessary to 'think more widely' about what governments tax, and how tax revenues are used. Here, we examine some of the taxes currently in place that are designed to help tackle climate change and its effects.

Landfill Tax

Landfill Tax applies to all waste disposed of by way of landfill, at a licensed landfill site, on or after 1 October 1996, unless the waste is specifically exempt.

The government charges the tax by weight and there are two rates, as shown in the table below:


Rate from 1 April 2020

Rate from 1 April 2019

Rate from 1 April 2018

Standard rate




Lower rate




Inert or inactive waste is subject to the lower rate of Landfill Tax.

Landfill Tax applies to disposals of material at a landfill site covered by a permit under environmental legislation; and disposals of material at an unauthorised waste site.

From 1 April 2015, Landfill Tax has been devolved to Scotland. From 1 April 2018, Landfill Tax has been devolved to Wales.

Tax on single-use plastics

In the 2018 Autumn Budget, Chancellor Philip Hammond announced a 'world-leading' new tax on plastic packaging which does not contain sufficient recycled content.

The tax aims to incentivise manufacturers to use recycled plastic, thereby helping to minimise the problem of 'excessive and environmentally harmful' plastic packaging.

The so-called Plastics Tax will take effect from April 2022, and will apply to plastic packaging which does not contain at least 30% recycled plastic. The government will also seek to reform the Packaging Producer Responsibility System in order to increase producer responsibility for the costs of their packaging waste.

In the Budget, the Chancellor outlined the government's commitment to maximise the amount of waste sent to recycling instead of incineration and landfill. Subject to wider policies not delivering on the government's waste ambitions in the future, it will 'consider the introduction of a tax on the incineration of waste', in conjunction with the Landfill Tax.

The Climate Change Levy

The Climate Change Levy (CCL) taxes UK businesses on their electricity and gas use. The CCL consists of two rates, which are charged at a specific rate per unit of energy. Firms are required to register for and pay the main rates of the CCL if they supply customers with electricity or fossil fuels (excluding oil).

Further information on the CCL can be found here.

The proposed Carbon Emissions Tax

The Budget also outlined plans for a Carbon Emissions Tax – however, this would only be introduced if the UK leaves the EU without a Brexit deal. The measure would introduce a tax on carbon dioxide emissions (and other greenhouse gas emissions on a carbon equivalent basis) produced by UK stationary installations currently in the EU Emissions Trading System (ETS).

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