Green taxes include: Fuel duties, Air Passenger Duty, Landfill Tax, Climate Change Levy (Carbon Price Support), Aggregates Levy, Vehicle duty and the EU Emissions Trading Scheme.
The amount of money brought in by green taxes has only risen 19% in the ten years since 2009/10 compared to a 53% rise in taxes as whole and far lower than inflation over the period.
Jason Collins, Head of Tax at Pinsent Masons says that revenue from environmental taxes remains stubbornly low and the freezing of key 'green' taxes in the Budget including fuel duty and carbon price support mean it is likely that this revenue will continue to fall.
Revenue from environmental taxes made up just 6% of total tax take last year, down from 8% a decade ago.
Pinsent Masons says the Government has shown it is willing to use taxation to shape behaviour on other issues, such as the Soft Drinks Levy, but is not yet begun to do this for the 2050 net-zero target. It says more needs to be done to disincentivise carbon polluting and encourage green investment.
The Government is considering a cut to Air Passenger Duty (APD) on domestic flights and adding extra bands so charges are more closely linked with the emissions created. However, it is not yet clear whether the Government intends to use this reform to raise extra revenue from APD. Even though domestic flights represent only around 1% of the UK's emissions, cutting APD on domestic flights to help connectivity within the UK looks like a backwards step in terms of encouraging climate friendly behaviour.
Jason Collins says: "The statistics suggest that far from making progress in using tax policy to reduce polluting activity, the UK has been going backwards."
"Taxation will play a vital role in driving the UK to its net zero target. The shrinking share of revenue brought in by green taxes is evidence that the Government isn't yet doing enough to discourage polluting behaviour."
In addition to revenue from green taxes remaining low, Pinsent Masons' research shows that the Government gave back only £2.9bn in green tax breaks last year, which represents just 7% of the amount raised by green taxes.
Jason Collins says that the approach to environmental taxes is currently 'not enough stick and not enough carrot' and does not give strong enough incentives for businesses to invest in environmentally-friendly technology. For example, the 'super incentive' for capital investment, introduced in the Budget, could have been geared more heavily towards incentivising investment in green technology.
Jason Collins adds that businesses need certainty over the future of taxation and tax reliefs for environmental issues in the coming years as the net-zero deadline gets nearer. The sooner the Government gives businesses clarity on what this tax roadmap will look like and what it will cost the better.
For example, there are still questions around which industries and business will be covered by the UK emissions trading scheme (ETS) which it established as the UK left the EU's scheme. An ETS sets a limit on the volume of greenhouse gases that polluters covered by the scheme can emit and requires them to acquire carbon credits, which can be traded, to cover their output. The UK ETS largely mirrors the EU ETS and only covers some industries, but the government has signalled a willingness to extend the scheme into other areas.
Adds Jason Collins: "Tax policy needs a wholesale change to help achieve net-zero. The Government needs to address the imbalance between taxes and tax reliefs to not only penalise polluters but reward businesses that invest in green technology to get the UK closer to carbon neutrality.
"The recent cuts to electric vehicle grants is just another example of the Government choosing not to incentivise consumers to make green decisions. Over time that kind of decision will make it significantly harder to hit the 2050 target.
"With the Governments' suggestion it may be considering extending the UK's Emissions Trading Scheme, it's crucial that businesses are given enough warning, so they can forward plan and make investments into reducing emissions.
"A wholesale review of the tax system is needed – with all new legislation designed with a focus on the impact on the net zero target."