Saving the planet - can tax and regulation help?

The appetite for addressing climate change has never been greater and with the publication of the Climate Change Bill and the energy white paper, the direction of current UK Government policy is now clearer.

While views are regularly expressed by consumers and individual businesses, there is a lack of hard and fast evidence on business opinion in this area.

To understand the perceptions of business, we commissioned a survey of companies across a wide spectrum of industries to understand business’ views of the UK Government’s use of tax and regulation to manage the environmental impact of business.

Business is virtually unanimous in agreeing that it is important for it to take measures to tackle climate change. As a result of climate change, 97% of the 151 companies surveyed expect to make more changes in the way they do business in the next two to three years and one third (32%) expect to make a lot of changes.

But it wants to do so within a stable framework of government policy which establishes a level and green playing field. Although two thirds (67%) of respondents regard current economic policy instruments as effective in providing signals to business of the need to consider their environmental impact, half (49%) do not think current policy instruments actually do encourage significant behavioural change.

Here is a summary of some of the key findings in Saving the planet – can tax and regulation help?

• 98% of businesses surveyed say it is important to take measures to reduce the environmental impact of industry;
• Over two thirds (71%) say that climate change and environmental issues are already affecting corporate behaviour;
• Meeting customer expectations, maintaining competitive advantage and making cost savings are influential in corporate environmental behaviour;
• Attracting and retaining staff appears as the least influential factor on corporate decision making in relation to climate change and the environment;
• Just over half of the companies surveyed (51%) do not feel confident about making long term investment decisions in the context of the current environmental tax and regulatory framework;
• Most respondents would like to have more confidence in the effectiveness of government policy formation in this area, particularly about how government departments, and the UK and EU, are working together to address climate change;
• Regulation is seen as the most effective tool to change corporate behaviour. Environmental taxes and tax incentives are also ranked ahead of emissions trading schemes. But those involved in emissions trading are supportive of it;
• Current environmental incentives in the tax system are seen as unclear, too complex and fail to motivate behavioural change;
• Two thirds (66%) of respondents would welcome the idea of using the tax system to incentivise them to become carbon neutral;
• There is a real thirst for reliable information and businesses consult many and varied information sources to help them with environmental issues;
• Businesses would like greater transparency around how Government uses environmental tax revenues to fund environmental initiatives.

These findings are intended to simulate an inclusive and constructive debate about what action is needed to ensure the UK tax and regulatory system is as effective and supportive as possible for companies dealing with the environmental consequences of doing business.

The results of the survey are essential reading for anyone responsible for the environmental tax and regulation agenda of from business.