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Fossil Fuels: Taxation

Question for Treasury

UIN 90854, tabled on 10 December 2021

To ask the Chancellor of the Exchequer, if he will make it his policy to conduct an assessment of (a) the UK’s support for fossil fuels through the tax system and (b) the compatibility of that support with the Glasgow Climate Pact.

Answered on

17 December 2021

The UK does not give any subsidies to fossil fuels, and follows the approach of the International Energy Agency, which defines fossil fuel subsidies as measures that reduce the effective price of fossil fuels below world market prices.

The International Energy Agency has a long-standing track record in systematically measuring fossil-fuel subsidies using a commonly applied methodology. This definition was originally developed with the European Commission and G20 EU Member States to respond to the G20 commitment to phase out such subsidies.

The UK has been a longstanding supporter of multilateral efforts to promote fossil fuel subsidy reform since these were first proposed in 2009, including through the G20, and the G7. The UK is a signatory of the Glasgow Climate Pact and is committed to the agreed phase-out of inefficient fossil fuel subsidies across the globe that encourage wasteful consumption, and sees clear benefits in doing so.

The government takes its environmental responsibilities seriously, and recently published the Net Zero Strategy on how the UK will deliver on its commitment to reach net zero emissions by 2050. Pricing carbon (including through tax) is one of the most efficient tools for promoting decarbonisation and already plays a key role in helping the UK achieve net zero emissions. There are also a number of taxes, including the Climate Change Levy and Vehicle Excise Duty, that are designed to encourage businesses and consumers to make greener choices. The government also incorporated a climate assessment in all relevant Tax Information and Impact Notes (TIINs) for measures at Autumn Budget and will continue to do so in future TIINs.

The government keeps all taxes under review, and any changes are made in the round at fiscal events.

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