Select Committee on Environmental Audit Minutes of Evidence

Memorandum submitted by the Royal Society for the Protection of Birds


  The RSPB supports the wider use of green taxes and charges in environmental policy. This submission presents the case for a pesticide tax and discusses how the environmental benefits of the Climate Change Levy can be maximised. We hope that the Pre-Budget Report 1999 will lead to the next Budget announcing a decision to introduce a pesticide tax, together with some changes to the design of the Climate Change Levy.


  The RSPB welcomes this inquiry. We believe that green taxes and charges have a key role in protecting biodiversity and the environment. They can give consumers and businesses strong financial incentives to reduce environmental impacts. They can ensure that prices reflect environmental costs and implement the polluter pays principle. They can generate revenue which can be used to fund environmental programmes or reduce other taxes. However economic instruments must be used in conjunction with regulations and other measures, recognising that regulations are better at ensuring minimum standards and reflecting local conditions.

  The RSPB is the largest wildlife conservation charity in Europe, with over one million members. Our work to protect birds and other wildlife ranges from managing nature reserves and carrying out ecological research, to trying to ensure that government policies, including tax policies, help protect the environment.

  This submission addresses two parts of the inquiry's terms of reference: the case for pesticides taxes and the design of the Climate Change Levy.


  The RSPB strongly supports the introduction of a pesticide tax. The Pre-Budget Report 1999 should propose this measure and in the Spring 2000 Budget the Government should announce a decision to introduce it. As with the Climate Change Levy, the decision should be followed by a period of at least 18 months, to determine the details.

  The pesticide tax must be part of a comprehensive package of measures designed to reduce the environmental impact of pesticide use. This section presents the environmental case for the tax, and then discusses the economic impacts and alternatives to the tax.

(a)  The environmental benefits of a pesticide tax

  From the RSPB's viewpoint, the main potential environmental advantage of a tax is that it would benefit farmland birds. Pesticide use has been a significant factor in the decline of farmland birds since the 1970s. Pesticides have removed plants and invertebrates (bird food) from farm habitats. Research shows that pesticides are a major factor in the decline of the grey partridge and corn bunting, and there is strong circumstantial evidence linking pesticide use to the decline of 18 other bird species.

  However, if the tax is going to reduce these impacts, it must be carefully designed and be introduced with other measures. A poorly designed tax could have adverse environmental impacts, if, for example, it encouraged the use of cheaper pesticides.

  In our response to the DETR/HM Treasury consultation[1] we argued for a banded tax, with higher tax rates on the more environmentally-damaging pesticides. This would help to prevent any perverse environmental effects which might arise from changes in the price of different pesticides, and would encourage a switch to more benign pesticide products. We argued that the banding system must take account of the full effects of pesticides on wildlife. ECOTEC's proposed banding system[2] does not address these effects, especially those of herbicides through the removal of arable plants. Further work is needed to incorporate the effects on wildlife into the banding system.

  The tax must be accompanied by a package of measures to reduce pesticide use and its environmental impact, including advice, training and agri-environment schemes. A significant part of the revenue from the tax should be allocated to these measures. In this way the environmental benefits can be maximised. By helping farmers to reduce their reliance on pesticides, such measures would also help to soften the economic impact of the tax.

  The ECOTEC report suggests that a 30 per cent tax would reduce pesticide use by between four per cent and 21 per cent, depending on its design. Apart from benefiting farmland birds, it would also benefit the aquatic environment by reducing pesticide levels.

(b)  Impact on the farming industry and the economy

  The farming industry has opposed the tax on the grounds that it would increase production costs and damage the competitiveness of the UK industry. However research shows that there is great potential for cost effective pesticide reductions. These have been estimated at £274 million per year (without the tax) in a study for DETR[3]. Even a critique of this for the British Agrochemicals Association put the savings at £100 million annually[4]. This suggests that the savings are at least 20 per cent of the value of pesticide sales. Therefore a significant part of the extra costs of a tax (say at 30 per cent) could be offset by pesticide reductions—without damaging farm incomes, especially if some of the tax revenue was used to help farmers to reduce pesticide use.

  The evidence that there are cost effective savings available to farmers supports the view that a tax is necessary to encourage farmers to reduce use. A continuation of current policy alone would not reduce pesticide use or the environmental impact of this use so significantly.

  Another point is that the tax could boost the incomes of organic farmers, as their competitive position would improve.

  The impacts on the farming industry and rural communities in general could be significantly reduced if much of the revenue from the tax was spent on training and agri-environment schemes, as suggested above.

  The industry claims that the timing is bad. Farming is in crisis, and incomes have fallen in the last three years. However arable farm incomes were at record levels three years ago, and are still higher than in the early 1990s. Further, even if the Government decided in favour of a tax now, it would not be implemented for at least 18 months, and could be phased in after that.

  A key economic argument for the tax is that it would help implement the polluter pays principle. At present water consumers have to pay the costs of removing pesticides from drinking water supplies. The annual cost of water treatment has been estimated at £100-120 million per year, on top of capital costs of £1 billion[5]. The tax would help reduce these costs.

(c)  Alternatives to a tax

  The existing regulatory system for pesticides plays a vital role in ensuring that pesticides are rigorously tested before entering the market, which helps to control their impact on human health and the environment. However, the regulatory system is unable to eliminate the environmental impacts of pesticides. For example, the most significant concerns about biodiversity relate to the effects on food chains resulting from the routine and legal use of pesticides. It is difficult to see how regulation could eliminate these impacts. A tax, however, can reduce them by encouraging overall reductions in pesticide use and a switch towards narrower spectrum products.

  Advisory and training schemes also have an important role to play, in equipping farmers with techniques to achieve profitable reductions in pesticide use. A tax would provide revenues to enable schemes such as these to be expanded, as well as price signals to enchance their effectiveness.

  Agri-environment schemes are also important, in encouraging the adoption of techniques and management practices that reduce pesticide impacts. However, in keeping with the polluter pays principle, regulations and taxes should be used to prevent environmental damage, and the use of subsidies should be restricted to encouraging the provision of public benefits. Some of the revenue from the pesticide tax should be used to support agri-environment schemes that enhance biodiversity and the environment, such as Arable Stewardship and the Organic Farming Scheme.


  The RSPB strongly supports the introduction of this levy. The Pre-Budget Report 1999 and the 2000 Budget should confirm its introduction in 2001.

  The levy is a key part of the Government's plans to reduce carbon emissions by 20 per cent by 2010. This, in turn, will benefit birds and other wildlife, although we recognise that much larger reductions (about 60 per cent) will be needed by the middle of the next century to protect biodiversity in the UK and overseas. Official research shows that about half of the UK's statutorily protected sites are likely to be affected by climate change by 2020[6]. Apart from mitigating climate change, the levy will also help reduce acid rain emissions and other environmental problems associated with the production and transportation of fossil fuels.

  Our recommendations for the design of the levy are as follows:

(a)  All renewables should be exempt from the levy

  All renewables, including renewable electricity, should be exempt from the levy. This is because the development of renewables is one of the main ways in which climate change can be mitigated. It would be illogical and perverse to apply the levy to renewables. The levy must encourage renewable electricity sources—and not merely be neutral towards them. We believe that exempting (or rebating) the electricity if the source is accredited under an accreditation scheme is the way forward.

  There is no compelling technical or administrative reason not to exempt renewables. Although renewable electrons are indistinguishable from other electrons once they are in the grid, it is perfectly possible to distinguish renewable electricity from other fuel sources on a contractual basis and to distinguish among renewable resources themselves (eg between NFFO-supported capacity and other renewables). Indeed, the ability to distinguish between products is a prerequisite for successful retail electricity competition based on bilateral contracts.

  Competition, and the ability to exempt or rebate renewable electricity, would be greatly facilitated by the introduction of a renewable (or green) electricity accreditation scheme, based on the EST's proposed scheme Future Energy. The electricity subject to this accreditation could be effectively exempt from the tax. This could mean exempting it from the tax or paying a rebate to accredited electricity, equal to the tax payment. The accreditation scheme might have to be put on a statutory basis, to ensure adequate verification.

(b)  The levy should be based on the carbon content of fuels, not the energy content

  The failure to exempt renewables partly relates to the decision to base the tax on the energy-content rather than the carbon-content of fuels. In our submission to Lord Marshall's consultation we argued for carbon-based tax, and this remains our view. A carbon-based tax would not only benefit renewables, it would also encourage fuel-switching from coal to gas, a lower-carbon fuel. A carbon-based tax would therefore be more environmentally-effective.

  However, even if the levy is introduced on an energy basis, it would still be environmentally effective. The Government estimates that it would reduce carbon emissions by 1.5 million tonnes by 2010. This is significant: the levy would bring five per cent of the total savings needed (29 MtC) to meet the 20 per cent reduction target.

(c)  Any special treatment for intensive energy users must not significantly weaken the incentives for those companies to improve their energy efficiency

  We consider that any special treatment should, as far as possible, retain incentives for major energy users to reduce their energy consumption. We therefore recommend either recycling the tax revenue to individual companies on a non-energy basis or requiring companies to meet demanding energy efficiency targets, in return for tax reductions.

  The energy-intensive sectors have claimed that the tax would be very damaging to their interests. The Energy Intensive Users Group, for example, claims that its members will pay extra tax of £571 million (without any tax rebate) and that job losses would be 28,000 (even with the 50 per cent rebate)[7]. However these figures do not take account of the scope for industry to make cost effective energy savings.

  ETSU has estimated that cost effective savings (even without the levy) amount to 11 per cent of energy use on average across industry. Even energy-intensive sectors such as iron and steel have potential savings of at least eight per cent[8]. The levy will help industry realise these savings. Furthermore, the figures do not take account of OFGEM's proposed changes to the pool system, which would reduce electricity bills by at least 13 per cent. These potential savings will offset the cost of the tax which (with the 50 per cent rebate) will be only between 10 per cent and 20 per cent of energy bills.

  However the concerns expressed by industry re-inforce the need for energy/carbon taxes to be agreed at an EU or wider level. This would be the best way of ensuring the UK's business competitiveness, without any weakening of the environmental effectiveness of the tax (through special rebates etc). One step forward would be to support the EU's proposed directive on the taxation of energy products, which would introduce minimum duty rates for fossil fuels across the EU.

(d)  The £50 million allocated to environmental programmes should be increased, to increase the overall environmental benefits of the tax

  We support the decision to use most of the revenue to reduce employers' national insurance contributions, because this will ensure that the levy contributes to eco-tax reform—or shifting tax from goods to bads. However we consider that insufficient funds (£50 million) have been allocated to environmental programmes. There is a good case for increasing the proposed level of expenditure in 2001-02, and increasing it in subsequent years, as the programmes become fully developed. This is because this spending could provide a significant proportion of the total environmental benefits of the tax.

  Some of the funds should be used for energy efficiency grants and advice—especially to SMEs. It should enable the programmes of the Energy Savings Trust to be expanded—and should not require the establishment of new bodies such as a carbon trust (with associated extra adminstrative costs).

  The funds should also be used to create new wildlife habitats, to replace those which will be lost from sea-level (see above). Since the use of fossil fuels in the major cause of these losses, using some of the revenue to fund these compensatory measures would be in accordance with the polluter pays principle. The habitats concerned include wet grassland, reedbeds and coastal lagoons.

  The funds should not primarily be used to support renewables because other major policies should do this—for example the proposed obligation on suppliers to a certain proportion of renewable electricity[9]. Also it is difficult to see how funding for renewables research would directly benefit SMEs, or help them to respond to the levy.

September 1999

1   RSPB response to DETR and HM Treasury consultation on Issues relating to the design and impact of a possible tax or charge on pesticides (June 1999). Back

2   Design of a tax or charge scheme for pesticides (March 1999). Report by ECOTEC to DETR. Back

3   Risk and Policy Analysts Ltd and Entec UK Ltd (1997) Private costs and benefits of pesticide minimisation. Back

4   Morley Agricultural Consultants Ltd (1998) An analysis of "Private costs and benefits of pesticide minimisation". Back

5   Redman (1996) Industrial agriculture: counting the cost. Soil Association. Back

6   Climate Change Impacts Review Group (1996). Second report. Review of the potential effects of climate change in the UK. Report to DoE Back

7   See para 24 of Trade and Industry Committee report on The impact on industry of the Climate Change Levy (July 1999). Back

8   See Table E1, Marshall Task Force report. Back

9   For further details see our response to the DTI's consultation paper on New and Renewable Energy (June 1999). Back

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