A tax on incineration means a tax on earnings made by creating energy from waste. It has been used as a stick to encourage increased recycling. Only last year, Theresa May said that government would consider an incineration tax if recycling targets weren’t met.

Those in the waste and recycling industries are waiting to see if this becomes part of the 2021 Budget, as the Treasury tries to rebuild our ailing post-pandemic economy. What would this mean to the sector?

What does the most recent Spending Review say about an incineration tax?

The Chancellor’s November Spending Review says nothing about a new incineration tax. It refers to various funding that supports the “UK’s net zero emissions target by 2050.” And Point 7 of its Executive Summary says: “This includes targeted investment to deliver a green industrial revolution, tackle climate change and support hundreds of thousands of jobs.”

There is a whole section called the ‘Green Industrial Revolution’, which reiterates the government’s previous commitment to environmental improvements. Specifically, points 29 and 30:

“29. The recovery from Covid-19 must be green. SR20 provides funding for the Prime Minister’s Ten Point Plan, which has set out the government’s vision to tackle climate change whilst simultaneously supporting hundreds of thousands of jobs across the UK. As transport is one of the highest-emitting sectors, SR20 prioritises investment to transition to zero emission vehicles, including by providing £1.9 billion for charging infrastructure and consumer incentives. SR20 also provides £1.1 billion to make homes and buildings net zero-ready.

30 To push the limits of what is currently possible, SR20 also invests in innovative clean energy technologies, building on existing UK strengths and venturing into exciting new industries. This includes £1 billion for a Carbon Capture and Storage Infrastructure Fund, and additional investment in low hydrogen carbon production, offshore wind, and nuclear power. This brings total investment to support a green industrial revolution to £12 billion.”

As with other tax revenue raising possibilities, like raising income tax or Corporation Tax, Chancellor Sunak didn’t commit to an incineration tax to boost recycling activity.

Where did the incineration tax idea come from?

Under Theresa May, her Secretary of State for the Environment, Therese Coffey said: “The landfill tax has been important in reducing landfill. As I have just said, we are consulting on measures that build on the resources and waste strategy that we published a few months ago. We have been quite clear that we must ensure that we increase recycling, and we will take further measures if incineration is still proving part of the problem.”

Current Parliamentary Under-Secretary of State at the Department for Environment, Food and Rural Affairs, Rebecca Pow, said that an incineration tax would be actioned “if the wider policies set out in the resources and waste strategy do not deliver our waste ambitions, as laid out in the Environment Bill and the strategy, including higher recycling rates”.

Still in the ‘stick’ department of the strategy.

What do other people think?

A director at research consultancy Tolvik, Adrian Judge, flags up the issues faced by other country’s attempts at an incineration tax when they become entangled with emissions tax regulations. He also said that he thinks the government position is that an incineration tax is a possibility “if it was demonstrated that other measures had failed to increase recycling rates.”

Head of resource policy at the Green Alliance, Libby Peake, said: “Over the past decades, government policy has encouraged energy from waste as the main bankable technology for resource businesses to invest in. That’s meant that waste reduction, reuse and recycling haven’t received the policy attention or the infrastructure investment that’s needed to create a more resource efficient, circular economy. As we move towards a net zero carbon world, it’s clearly time to redress the balance.”

“As part of this, the government should be looking to improve the fiscal incentives: the landfill tax was a start, the plastics tax is moving in the right direction, but much more is needed to encourage investment in circular economy activities like remanufacturing, reuse and high quality recycling. An incineration tax is one option, adopted by several European countries, that’s worth further investigation. If introduced here, it should be used in conjunction with other measures to prevent waste at source, and businesses and local authorities should get the policy certainty and clear lead in time to adapt and put in place the alternatives.”

So for this organisation, an in-depth overhaul to create joined-up strategy is the preferred option. And considering an incineration tax as part of this is completely valid.

What about the Environmental Service Association’s opinion?

As a representative industry body, the Environment Service Association’s (ESA) opinion is very important. They point out that time to put new policies into action with deliverable results, is absolutely crucial. This is in agreement with the government’s stance. See if recycling and waste targets are met within the proposed timescale and then add other measures if necessary.

The ESA also seem to be thinking along the same lines as the Green Alliance, in terms of having a clear, detailed strategy for tackling this element of our environmental emergency.

They said: “We support this position because we believe a more sophisticated set of policy tools is needed to stimulate recycling. The new measures proposed for Extended Producer Responsibility (EPR), municipal collection consistency and a potential tax on virgin materials will drive more material towards recycling and strengthen, what can be, volatile and constrained markets for some materials – rather than just simply making residual waste treatment more expensive without stimulating alternative market capacity, which we believe a so-called incineration tax would do.

“In the meantime, energy recovery facilities serve a vital public function and have helped the British public divert millions of tonnes of waste from landfill every year, while saving two hundred kilogrammes of CO2 for every tonne of material not send to landfill. They are a complementary part of the waste hierarchy and among the most heavily regulated industrial facilities in Europe.”

Is an incineration tax likely in the 2021 Spring Budget?

We just don’t know. With the dual uncertainties of COVID-19 and leaving the EU, it’s difficult to predict any government decisions about the economy. We will have to wait and see if an incineration tax is included in, what most say, are inevitable tax increases. And previous taxes, such as those on single use plastic bags, have proved to be a successful step in the road to environmental protection. One thing you can be certain of, whenever we know, you’ll know.