• The UK government will impose a new tax on imported goods in 2027 to protect domestic businesses.
• Energy companies are paying more green taxes; many are considering relocating abroad.
• Environmental taxes paid by households were pegged at £642 in 2022, down from £763 in 2010.

The UK's revenue from green taxes touched the lowest level on record, notes the Office for National Statistics (ONS).

The UK government collected £54.3 billion from environmental taxes in 2024, relatively lower than the £54.6 billion logged in 2023. For the present, green taxes account for merely 1.9% of the UK's total economic output, which is the lowest level since records began in 1997. Also, they make up just 5.4% of all tax revenue, another dip in income for the government.

The report attributes fuel duty freezes and a sharp decline in emissions-related income as the primary reasons. From time to time, the government has repeatedly frozen fuel duty since 2011, meaning it has not increased taxes on petrol and diesel in line with inflation. Incidentally, in 2022, it also cut fuel duty by 5 pence per litre, and revenue from the Emissions Trading Scheme and the Climate Change Levy has also plummeted.

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Now, businesses are bearing the brunt of these decisions. Some argue that green taxes pose an existential threat, making it too expensive to operate in the UK. Recently, Ineos, a chemical company, said that carbon taxes and high energy costs are damaging the industry. In the meantime, the pressure on the government is mounting to reduce overall taxes, which are now at an all-time high post-war.

However, the UK collects less from green taxes than most European Union (EU) nations. Of the 27 EU countries, only eight collect a smaller share of GDP from green levies than the UK.

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The report also sheds light on the shift of tax burden from households to industry. The government, over the past decade, has tried to save households from green taxes, mostly through freezing fuel duty.

Consequently, in 2022, environmental taxes paid by households were pegged at £642, down from £763 in 2010. But, businesses, particularly, larger energy corporations, have to pay more green levies, with the energy industry recording £8.9 billion in 2022, up from £6.5 billion the year before.

To address this issue sooner rather than later, the government is set to impose a new tax on imports in 2027. To this end, it plans to introduce a Carbon Border Adjustment Mechanism. This aims to prevent industries from relocating abroad due to high domestic taxes and to create fairer competition for UK businesses by taxing imported goods from countries that do not have corresponding green taxes.

ALSO READ: Businesses Call for UK–EU Carbon Market Connection

For a more detailed exploration, please visit the Office for National Statistics' official website.

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Source: Bloomberg