10 March 2003

Environmental appraisal of Budget measures

The Government is committed to appraising the environmental impact of Budget measures. Table 1 shows how Budget measures sit alongside other policies as part of the Government's approach to the environmental elements of sustainable development. Table 2 sets out the environmental impact of measures introduced in recent Budgets which have a significant effect on the environment or which serve an environmental purpose. The Government aims to ensure that policy design, appraisal and evaluation take account of costs and benefits, the precautionary principle, and the need to internalise costs by making the polluter pay.

Table 1: The Government's policy objectives and Budget measures

Policy objective	Sustainable development indicator¹	Data indicating recent trends	Recent Government measures
Tackling climate change and improving air quality	Emissions of greenhouse gases	Between 1999 and 2000 emissions of the basket of six greenhouse gases showed no significant changes. Since 1990 they have fallen by 13 per cent²	Other Government measures Climate Change Programme, DETR November 2000 Emissions Trading Scheme, DEFRA August 2001 Air Quality Strategy for England, Scotland, Wales and Northern Ireland, DETR January 2000 Ten Year Plan for Transport, DETR July 2000 Powering Future Vehicles, DfT et al, July 2002 Budget measures Climate change levy package Reduced rate of VAT on the installation of energy saving materials Road fuel duty Green Fuel Challenge Reforms to car, lorry, van and motorcycle VED Company car tax and fuel scale charge reform, and authorised mileage allowance payments 100 per cent first-year allowances for cars with low carbon dioxide emissions, and hydrogen and natural gas refuelling infrastructure Green travel plans - using tax incentives to promote their development
	Days when air pollution is moderate or higher	Number of days with moderate or high air pollution increased from 16 in urban sites and 25 in rural sites in 2000 to 21 in urban sites and 30 in rural sites in 2001³
	Road traffic	Traffic levels in 2001 were 1.2 per cent higher than in 2000⁴

Improving waste management	Waste arisings and management	Proportion of household waste being recycled was over 11 per cent in 2000-01, an increase of 1 per cent over the previous year⁵	Other Government measures Waste Strategy 2000, DETR May 2000 Budget measures Landfill tax and landfill tax credit scheme

Regenerating Britain's towns and cities	New homes built on previously developed land	In 2001, 61 per cent of new housing was on previously developed land, increasing from around 54 per cent in the early 1990s	Other Government measures Urban White Paper, DETR November 2000 Package of measures to tackle abandoned vehicles Budget measures Capital allowances for flats over shops Tax relief for cleaning up contaminated land Stamp duty exemption for disadvantaged areas Reforms to the VAT treatment of conversion and renovation activity

Protecting Britain's countryside and natural resources	Populations of wild birds	In 2000 the decline in farmland birds - halving since 1977 - continued to level off. Woodland birds increased to their highest level since 1990¹	Other Government measures Rural White Paper, DETR November 2000 Budget measures Aggregates levy and Sustainability Fund
	Chemical river quality	In 2001, 95 per cent of rivers in the UK were of good or fair chemical quality, little change from 2000⁵
1 Achieving a Better Quality of Life, DEFRA January 2002 - latest data from www.sustainable-development.gov.uk. 2 The main six greenhouse gases are: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perflourocarbons, sulphur hexaflouride. 3 2001 results were slightly poorer than for 2000 (the best year to date), mainly due to the weather. 4 After adjustment for the effect of the September 2000 fuel protest and foot and mouth disease in 2001, growth is still 1.2 per cent. 5 Municipal Waste Management Survey, 2000-01, DEFRA. As the headline waste sustainable development indicator has not yet been updated this currently relates to the core indicator on household waste.

Table 2: The environmental impacts of Budget measures
Budget measure	Environmental impact¹
Climate change levy package	Savings of at least 5 MtC² per year by 2010³, ⁴.
Reduced rate of VAT on the installation of energy-saving materials	Reduction of 0.1 MtC per year by 2010⁵.
Reduced rate of VAT on domestic fuel and power	Estimated to increase emissions by 0.2 MtC per year by 2010⁴.
Road fuel duty differentials⁶	The shift to ULSP from ordinary unleaded is estimated to have reduced nitrogen oxide emissions by 1 per cent, carbon monoxide emissions by 4 per cent and emissions of volatile organic compounds by 1 per cent per year between 2001 and 2004. The shift to ULSD from ordinary diesel is estimated to have reduced emissions of particulates by 8 per cent and nitrogen oxides by up to 1 per cent per year between 2001 and 2004. The reduced rate for biodiesel could save up to 0.2 MtC per year by 2010⁶. The road fuel gas differential will result in a reduction in emissions of particulates and nitrogen oxides.
Green Fuel Challenge	Identify fuels which could result in reductions in emissions of carbon dioxide and local air pollutants. Potential waste policy benefits.
Reforms to car, lorry, van and motorcycle VED	Reductions in emissions of carbon dioxide and local air pollutants.
Company car tax reform	Savings of 0.05 to 0.1 MtC in 2002-03. In the long run savings are estimated at between 0.5 and 1 MtC per year⁷.
Fuel scale charge reform	Programme of five-year increase in the fuel scale charge is estimated to have reduced the number of drivers in receipt of free fuel by over 150,000⁷. Expected to reduce carbon dioxide and local air pollutant emissions. Restructuring the fuel scale charge in 2003 to relate it to carbon dioxide emissions and to include the same discounts and premiums as in the company car tax system will reduce emissions of carbon dioxide and local air pollutants.
Authorised mileage allowance payments	Reductions in emissions of carbon dioxide and local air pollutants.
100 per cent first-year allowances for cars with low carbon dioxide emissions, and hydrogen and natural gas refuelling infrastructure	Reductions in emissions of carbon dioxide and local air pollutants.
Green travel plans	Reductions in emissions of carbon dioxide and local air pollutants.
Air passenger duty (APD)	Reductions in emissions of carbon dioxide and local air pollutants.
Capital allowances for flats over shops	Bringing empty space over shops back into the residential markets, helping to create greater urban diversity while reducing the pressure for new greenfield development.
Tax relief for cleaning up contaminated land	Increases in the clean up of contaminated land.
Stamp duty exemption for disadvantaged areas	Regeneration and improved functioning of property markets in Britain's most disadvantaged areas.
Reforms to the VAT treatment of conversion and renovation activity	Reduced pressure on greenfield site development due to the better use of existing buildings.
Aggregates levy and Sustainability Fund	Reductions in noise and vibration, dust and other emissions to air, visual intrusion, loss of amenity and damage to wildlife habitats.
Landfill tax and landfill tax credit scheme	Encourages waste producers and the waste management industry to switch away from landfill towards waste minimisation, re-use and recycling
1 These estimates are subject to a wide margin of error. 2 Million tonnes of carbon. 3 There are a number of difficulties involved in estimating the emissions savings from the individual components of the climate change levy, including the need to avoid double counting. Of the 5MtC per year by 2010; the levy and exemptions account for 2.0 MtC, the negotiated agreements account for 2.5 MtC and energy efficiency measures account for 0.5 MtC. A related measure, the emissions trading scheme, is forecast to save 1.1 MtC per year by 2006. 4 Based on the DTI energy model. 5 Using NETCEN emissions models - further detail on the methodology used is provided in NETCEN's January 2000 report UK Road Transport Emissions Projections. Between 1997 and 1999, the fuel duty escalator is forecast to have reduced emissions by 1 to 2.5 MtC per year by 2010. The reductions in fuel duty in Budget 2001 are estimated to have increased emissions by between 0.1 and 0.2 MtC per year by 2010. 6 DfT modelling. 7 Based on Inland Revenue modelling.

Tax and Environment index

Environmental appraisal of Budget measures

1 Achieving a Better Quality of Life, DEFRA January 2002 - latest data from www.sustainable-development.gov.uk.

2 The main six greenhouse gases are: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perflourocarbons, sulphur hexaflouride.

3 2001 results were slightly poorer than for 2000 (the best year to date), mainly due to the weather.

4 After adjustment for the effect of the September 2000 fuel protest and foot and mouth disease in 2001, growth is still 1.2 per cent.

5 Municipal Waste Management Survey, 2000-01, DEFRA. As the headline waste sustainable development indicator has not yet been updated this currently relates to the core indicator on household waste.

1 These estimates are subject to a wide margin of error.

2 Million tonnes of carbon.

4 Based on the DTI energy model.

6 DfT modelling.

7 Based on Inland Revenue modelling.