Environmental taxes, sometimes known as green taxes or pollution taxes, are simply legislation meant to reduce business and individual practices that may cause damage to the environment. This encourages business to operate in a way that’s more environmentally friendly, and is why these taxes have been hitting new highs in recent years. Regardless of all the different types of green taxes, they all share one goal: to cut harmful emissions and garner more energy from sustainable means.

What Are Green Taxes?

Environmental taxes can take the form of penalizing individuals emitting harmful chemicals or rewarding those people using environmentally-friendly practices. Some taxes encourage the expansion of low-carbon power. Others work to subsidize home insulation or tackle fuel poverty. Certain environmental taxes aren’t necessarily for the environment, but for the consumer. For example, there are measures that provide low-income consumer with a discount on their energy bills.

Types of Environmental Taxes

There are a few types of environmental taxes that businesses in the UK have been paying. Industrial pollution taxes are one of them. Industrial companies pay these taxes since they are responsible for producing a significant amount of pollution.

The harmful emissions they produce must be taxed since these emissions harm the local environment and surrounding area too. This might be in the form of a carbon tax, a common practice used in Europe which places a levy on the carbon content of fossil fuels. There are also individual revenue-based taxes. These are the taxes which are meant to curb practices which can damage the environment, usually by individuals.

You might see congestion charges, increased gasoline tax, or other vehicle taxations. These policies are usually not popular, but have shown to legitimately reduce CO2 emissions.

The final type of environmental tax is incentivized taxation, which can apply to both individuals and businesses. This tax isn’t about punishing people for emitting harmful gases. It is about rewarding people for employing practices which are meant to help the environment. Adding solar panels can reduce the tax rate thanks to incentivized taxation, for instance. There is the danger that such methods might encourage more people to simply pollute less, which is why this type of tax is monitored very closely.

Environmental Tax Measures

A few tax measures work to benefit people socially, like the Energy Company Obligation. ECO subsidizes insulation for low-income households. Other measures like the Warm Homes Discount subsidy low-income households to help pay their energy bills.

Companies that use renewable power can make use of the subsidies as a part of Renewables Obligation and Feed in Tariffs. Those companies that produce fossil fuels will be taxed thanks to the EU Emissions Trading Scheme, and the Carbon Price Floor as well. This top tax ensures that there is a “floor” set on the carbon price so revenues go straight to government coffers rather than to a social or environmental policy.

Problems with Green Taxes

Green taxes are meant to be good for the environment, but they can also be a problem when they push up energy bills. Families who are already struggling may have a hard time affording the higher bills that accompany environmental taxes, especially since bills may raise by as much as 8 percent.
Even though the Prime Minister stated that such tax burdens would be lifted, it has so far been difficult to do so. The attempt to reduce bills requires a reduction in taxes, which UK leaders are still working on.

Environmental Tax Highs in the UK

Over the years, environmental taxes have hit record highs. In 2014, the taxes capped off at 44.6 billion euros. This showed that over the past two decades the green tax has more than doubled from the 19.4 billion that it was in 1994. There have been consecutive increases over the past few years usually on account of transport fuels like petrol and diesel. Renewable energy taxes rose as well, making it difficult for some companies and individuals to afford them.

Current Green Taxes

The UK is striving to obtain standards demanded by the EU, although certain parties are against the taxes due to the impact they have on businesses. Some parties say that these taxes prevent businesses from expanding while other parties are trying to work for an increased emphasis on these taxes. With more environmental taxes, there is an increased likelihood of diversifying the tax base.

Individuals like the Energy Secretary are working on reducing energy bills caused by green taxes too. Their focus is on providing people with clean and secure energy which is also affordable. Cutting some of the green measures may reduce the average energy bill by as much as 110 euros.

Reliefs or Tax Exemptions

When businesses pay these taxes, there is a possibility that they can get reliefs or be exempt from some of the taxes whether you’re living in the UK or the US. Your business might get some of these if you use a lot of energy due to the nature of your business. Or perhaps you’re a small business that doesn’t use much energy. Another scenario is if you buy energy efficient technology for business purposes.
You can also pay less tax by applying for some programs to show that you’re operating more efficiently. The less damaging the waste that you produce, the less tax you will need to pay. You may be able to earn yourself a reasonable tax rebate. If you’re unsure, a quick check at Quick Rebates and their tax rebate calculator may provide some assistance.


Environmental taxes have been increasing in recent years to reduce the impact of poor environmental practices. It has also increased to encourage more people to run their businesses in an environmentally-friendly way.

These types of taxes have reached new highs, which is great for the environment, but which may be raising home energy bills for the ordinary family. In order to save yourself some money, calculating your tax rebates may be a good option regardless of whether you’re running a business or working as a private individual in either the US or the UK.


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Written by Jaye Hastings

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