Memorandum from the Environment Agency
1. THE ENVIRONMENT
The Agency welcomes this opportunity to comment
to the Environmental Audit Committee on this year's pre-budget
For many years there have been promising developments
in the way the Chancellor has used the budget process to further
sustainable development. This year's Pre-Budget Report has brought
further specific moves in this direction. The Agency welcomes
The further moves to incentivise
industry to adopt clean technology: in particular we welcome the
inclusion of technology to improve water use and quality.
Continued pressure on transport emissions,
with the extension of the reform of VED and new incentives for
cleaner fuels and cleaner technology. The fact that this reform
has continued over many years shows that the Treasury firmly believes
in the importance of the links between the budget process and
The introduction of a simple aggregates
tax, with no let out for so-called "green quarries"
and continued pressure on the use of pesticides.
The Agency is also pleased to see that the Pre-Budget
Report includes references to sustainable development other than
in specific green measures. We welcome the Treasury's decision
to publish its guidance on sustainable development in SR2002.
We trust that this means that the Treasury will press strongly
for Departments to take a holistic view of their contribution
to sustainable development.
The Agency also welcomes the fact that, in the
midst of a standard discussion of the economics of productivity
in the Pre-Budget Report, the Treasury included a reference to
recent work on resource productivity. However it seems clear that
this does not yet fit into the Treasury's growth paradigmfor
example there are no particular conclusions drawn on how it might
be used as part of the drivers for productivity growth, nor for
how it could be used as measure of success. The Agency hopes that
the Treasury will continue to work on developing these areas in
Finally, the Environment Agency welcomes the
Treasury's increasing openness on this issue. With fellow agencies
and other environmental interests, we have been made welcome by
Treasury and feel that our concerns are actively listened to.
2. THE AGENCY'S
We would like to use this opportunity to focus
not just on the specifics (though we do have specific measures
to propose) but to reflect on what has been achieved, and on where
we might go in future. The Environment Agency's Vision document
has already spelled out the potential role of economic instruments
in the future of environmental protection. 
Because much has been done, we appreciate that
there is a need for allowing some of the measures already introduced,
most notably the Climate Change Levy, to bed in. Therefore we
are not altogether surprised that the Pre-Budget Report does not
contain some of the further measures that are needed in the longer
term to deliver sustainable development. However that does not
mean that this should be a time of inaction. There are three elements
that we think need to be addressed, not just as part of a single
budget paper, but as part of the overall process. These are:
1. A systematic review of existing measures,
to determine the environmental outcomes and behavioural changes
they are delivering.
2. An immediate start on medium term actions
that we already know are essential.
3. A longer term comprehensive review of
the overall taxation system, to ensure it is on a path to deliver
2.1 A systematic review of existing measures,
to determine the environmental outcomes and behavioural changes
they are delivering.
It seems widely acknowledged that to deliver
sustainable development and a better environment, we need more
than traditional regulation. The Agency's Vision clearly envisages
a wider portfolio of policy instruments being used in a complementary
fashion. In order to develop this portfolio, we need to evaluate
the performance of existing instruments.
The Agency believes that this requires systematic
research into the way that existing measures, such as the Climate
Change Levy and the Landfill Tax Credit Scheme are changing environmental
outcomes and behaviour. Without this background information, it
will be difficult to develop these instruments, and to design
improved instruments for the future.
The Agency has been involved in setting up the
systems that monitor the Climate Change Levy and the Pesticides
Voluntary Agreement. We do believe that this will enable us to
better understand the performance of these measures, and improve
them in the future, provided that a systematic review, that looks
across the environmental, economic and social dimension is put
We would look to a similar broad based analysis
of the Landfill Tax, which would complement ongoing work in DEFRA.
2.2 An immediate start on medium term actions
that we already know are essential
In parallel with setting up this essential research,
we know that we can move forward on some critical areas of work.
In this regard, we see it as being essential that there be a comprehensive
review of the waste taxation system. Central to this would be
the conversion of the landfill tax into a waste disposal tax.
This is vital if the UK is to deliver on its
waste strategy, without constructing costly and unpopular incinerators.
The current demanding recycling targets, and the need to reduce
waste to landfill, require significant changes in behaviour and
in institutional arrangements.
Refocused waste taxation would send signals
to all producers of waste about the relative environmental damage
of waste disposal routes. The revenues from taxation could then
be used to fund changes in the way we deal with waste, for example,
providing more effective kerbside collection, etc. In this way,
the changed basis of waste taxation, instead of being a burden,
could be used to make the achievement of targets, and compliance
with regulations such as the Landfill Directive, more efficient
The current escalator on the Landfill Tax is
a positive signal of the direction that waste taxation needs to
go. We believe it is important that we start now so that we have
a full system to implement, at the latest, when the escalator
finishes in 2004.
The Agency's views on waste taxation are set
out more fully in the attached papers:
"Scope for Economic Instruments2001-02Summary
of Environment Agency paper for the Treasury"
"Environment Agency Position
Statement: Responding to the challenge of sustainable waste management."
2.3 A longer term comprehensive review of
the overall taxation system, to ensure it is on a path to deliver
The Agency's long term goal is for the fiscal
system as a whole to reflect a drive for sustainable development
and the environment. It will best do this by taxing resources,
and reducing taxes on labour and other goods, and by incentivising
people to think and act environmentally. To that end we support
calls for a wider review of the tax system, to deliver the changes
needed. Only such a review will ensure that the tax system can
truly make its full contribution to sustainable development. This
could cover the extent to which fundamental changes in VAT or
corporation taxes could be used to promote greener consumption
The recent PIU study on resource productivity
will be a major element in taking this work forward. Moreover
this is also a potential way in which the Treasury can further
improve the environmental information in the Budget and Pre-Budget
Reports. For example, relatively simple measures such as the carbon
intensity of output or of value added would indicate how successful
the Treasury was in promoting, not just investment that increased
GDP, but in promoting truly sustainable development.
We commend these ideas to the Environmental
Audit Committee and would be happy to elaborate on them if the
3 December 2001
ANNEX A: SUMMARY OF AN ENVIRONMENT AGENCY
PAPER FOR THE TREASURY
SCOPE FOR ECONOMIC INSTRUMENTS2001-2
The Agency would like to maintain and increase
the momentum of developing fiscal instruments to address environmental
issues and enhance resource productivity.
Waste and resource policy particularly need
further stimulus from economic instruments. The Government has
made a major commitment to increasing waste recycling in the UK,
shifting from our current reliance on landfill. There is a critical
need to bridge the gap between current practice, and what needs
to be done to deliver such sustainable waste management. If these
changes are not made, the UK faces a difficult time, including
addressing the construction of many, unpopular, waste incinerators.
A waste disposal tax, developed from the existing
landfill tax, would give business and consumers incentives to
enhance resource productivity and make it easier for the UK to
achieve the targets of the Waste Strategy. Other possible measures
Aligning other fiscal incentives
to waste disposal routes with the waste hierarchy. For example,
because incineration is exempt from the Climate Change Levy it
becomes more attractive than recycling.
Recycling a greater portion of waste
tax revenues to local authorities. This could be done in proportion
to the amount recycled and composted so there is a dynamic incentive
to encourage such activity. This would also help ensure a level
playing field for recycling, which may be at a disadvantage in
competing for PPP funding, which tends to favour large scale capital
Introducing tradable credits so as
to allow local authorities a degree of economic flexibility in
attempting to reach their recycling/composting targets. Credits
would also produce a financial incentive for local authorities
to improve their recycling and composting performance.
Incentivising manufacturers to reduce
or recover packaging. For example this could be addressed by giving
manufacturers rebates on general taxation (eg Corporation Tax),
where they operated an accredited scheme. This could also help
forestall further regulation in this area, so reducing the burden
of regulation on firms that behave well.
Moreoever, we believe that the Government needs
to show leadership in the area of variable charging for domestic
waste. We recognise that this is politically sensitive, but simple
measures now (eg pilot schemes, separately identifying waste costs
in local authority charges) will pave the way.
Diffuse pollution and planning policy are other
areas where fiscal and other economic instruments would make a
difference. Regulation alone cannot deal with diffuse pollutionhence
we encourage the exploration of economic instruments. We also
support work by DTLR on developing economic instruments for planning
ANNEX B: RESPONDING TO THE CHALLENGE OF SUSTAINABLE
Waste should be viewed as a potential resource
and the production of waste as a waste of resources. The link
between improved prosperity and domestic waste generation must
be broken. Society should come up with a solution for its waste
and we should not pass on our problems to future generations.
The Agency supports the waste management hierarchy: prevention,
minimisation, reuse/recycle and disposal.
Local and regional waste strategies need to
link effectively with the planning system. Waste strategies should
be based on the Best Practicable Environmental Option, taking
into account waste management impacts across the life cycle including
transport, local environment concerns, biodiversity and "environmental
There is no risk-free waste treatment or disposal
option. With the Government, the Agency is sponsoring research
into the potential health impacts of waste management activities.
We regulate the treatment, storage and disposal
of controlled waste at over 8,000 waste management sites to prevent
pollution of the environment or harm to public health. We also
register and monitor the performance of businesses that produce
waste. We monitor and enforce controls over waste transport, including
registering 50,000 waste carriers and tracking up to 750,000 movements
of hazardous waste a year. As well as being a regulator we advise,
working for instance with waste minimisation clubs to help reduce
water use, production of solid waste and energy consumption. We
investigate and prosecute in cases of environmental crimes such
A significant reduction in the disposal of toxic,
persistent and bio-accumulative waste, with the aim of eliminating
it. Specific waste streams need to be targeted based on quantity
The Agency to be funded, via the revised Special
Waste Regulations, to audit and advise producers to reduce hazardous
waste generation by businesses. Industry, business and commerce
to reduce waste production and find alternative beneficial uses
Better understanding of why municipal waste
continues to grow, in order to deliver a year on year reduction.
Businesses should reduce the amount of material which householders
have to dispose of after buying goods, and the principle of producer
responsibility should be extended to more products.
Local authorities to be allowed to pilot charging
schemes for domestic waste.
Reform of the landfill tax credits scheme to
focus on waste reduction, re-use and recycling.
Conversion of the landfill tax into a waste
disposal tax, with graduated charges according to the environmental
impacts of the disposal method.
Exemption of secondary materials reprocessing
from the climate change levy.
The introduction of deposit refund schemes for
household hazardous wastes which should be treated at the correct
Encouragement of the Regional Technical Advisory
Bodies to broaden their membership to include local community
Greater stakeholder engagement in the development
of local strategic waste plans, and the translation of the plans
into facilities and contracts.
Planning and pollution control applications
to be determined at the same time.
Reliable and up to date waste generation and
Implementation of new regulatory waste duties
as far as possible through Pollution Prevention and Control. New
duties such as the Landfill Directive, end of life vehicles, agricultural
waste, and special waste need to be adequately funded: these will
have substantial resource implications for the Agency.
Given the extent of the changes required, new
regulatory regimes for wasteincluding agricultural controlled
wastes, new producer responsibilities, and new hazardous waste
controlsshould be phased.
The UK currently generates annually around 29
million tonnes (mt) of municipal solid waste (MSW) every year,
78mt of commercial and industrial waste, and 400mt in total (which
includes construction and demolition waste). Of the MSW, ten per
cent is recycled/composted, eight per cent incinerated and 81
per cent landfilled. Half of industrial and commercial waste is
landfilled, and 39 per cent recycled.
Overall waste production is being reduced but
household waste is growing. The number of facilities required
to meet the Landfill Directive diversion targets over the next
15 years will depend upon MSW stock. If it continues to grow at
3-5 per cent per annum, the annual amount will have doubled by
2020, the UK will have to recover around 40 million tonnes annually,
and 1,000 to 2,000 new waste facilities will be required.
For an average householder, the annual water
bill is £135 but the average waste bill is £50.
By 2020 there has to be a 65 per cent reduction
in the amount of biodegradable municipal waste landfilled compared
with a 1995 baseline.
Various materials are to be banned from landfills:
hazardous liquids and corrosive materials by July 2002, whole
tyres by July 2003 and shredded tyres by July 2006.
There are eleven municipal waste incinerators
in England and Wales. These are all new or significantly modified
since 1996. All meet European standards of construction, maintenance
and operation. The Agency is aware of around 20 potential new
incinerators. The "energy from waste" industry estimates
that only 6-11 will be built over the next five to 10 years. Other
research puts the figure at around 100 incinerators.
The Agency has no objection in principle to
incineration provided that: it does not undermine better waste
management options within the waste hierarchy; it represents the
Best Practicable Environmental Option (BPEO) for disposal taking
into account the waste hierarchy; it forms part of a regional
or local strategy developed by local authorities based on the
BPEO, taking into account the waste hierarchy and the need to
dispose of waste in the nearest appropriate installation; the
size, location and type of incinerator is consistent with the
regional strategy and with statutory requirements to establish
an integrated and adequate network of waste disposal installations;
and individual incinerators meet stringent controls so as to minimise
pollution of the environment, impact on human health and the effects
on the local amenity.
2 An Environmental Vision-The Environment Agency's
Contribution to Sustainable Development, 2001. Back