Whilst the impact of COVID-19 on the environmental taxes agenda is yet to be fully understood, it would seem prudent for businesses to continue to prepare for the implementation of those measures announced albeit with the expectation that there may be some delay or modification.

Plastic Packaging Tax and UK ETS

On 28 April 2020, the UK Government announced that, in light of COVID-19, it would extend the deadline for responses to its consultation on the UK’s proposed plastic packaging tax (“PPT”) . The PPT would tax the production and import of plastic packaging composed of less than 30% of recycled content at a rate of £200 per tonne. 

The announcement has created some uncertainty. Firstly, as to whether the delay to the PPT consultation is a precursor to a delay to the implementation of the PPT, which is set to be operative from April 2022. Secondly, how COVID-19 will steer the development and implementation of other environmental taxes.

Evidently, COVID-19 has had an unprecedented impact on business and the wider economy, with warnings from the Bank of England that the UK economy will experience the sharpest recession on record. The UK Government may take the view that environmental taxes (such as the PPT) will place additional burdens on business activity in the short-term at a time when they can ill afford it. For example, by causing producers and importers of plastic packaging to incur further costs to ensure it contains sufficient recycled material. To avoid this, the UK Government may delay implementation of the PPT, although it has made no statement to this effect (and the April 2022 commencement date may be felt to be sufficiently far in the future).

Such an approach could also have impact on other tax legislation. For example, the Carbon Emissions Tax. The UK will remain part of the EU Emissions Trading System (the "EU ETS"), which allows participators to trade emissions permits and dis-incentivises emissions, only until 31 December 2020. It is currently uncertain whether a future UK Emissions Trading System will be linked to the EU ETS (as stated in the Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom (the “Political Declaration”), the EU and UK retain autonomy in dealing with regulations in areas such as climate change). In the absence of any linkage, the UK Government has proposed legislation to introduce a Carbon Emissions Tax as a fallback independent carbon-pricing mechanism. Due to the economic stress imposed by COVID-19, it is possible that the UK Government will decrease, or put off increases to, the current rate.

Assessing the impact of COVID-19

It is important to assess whether it is likely that COVID-19 would lead to a change in, or delay to, the UK Government's environmental tax agenda. Whilst it is difficult to make a hard estimate of the short-term impact, it seems unlikely that COVID-19 will affect the long-term environmental objectives of the UK Government. At the UK Parliament negotiations on the UK’s future relationship with the EU on 19 May 2020, Cabinet Office Minister Michael Gove stated that, with respect to  environmental measures (and in particular, measures to combat single-use plastic), “in significant areas, our plans are ahead of where the EU is now. None the less, we want to work co-operatively because, even though we may be in different jurisdictions, we all share one planet.” Indeed, the UK, ahead of EU-wide legislation, passed laws in 2019 to bind the UK Government to achieving net-zero emissions by 2050. 

Furthermore, the EU’s stance may also be persuasive. On 17 April 2020, MEPs passed a resolution which put the Green Deal at the centre of the COVID-19 recovery and reconstruction package. Whilst this will not affect the UK directly, the EU and UK have stated under the Political Declaration that they will co-operate in respect of environmental matters. This suggests that the UK may remain committed to implementing environmental taxes, particularly in the long-term.