Lord Turner to unveil £150bn green tax overhaul

The campaign for the government to overhaul the UK's tax system in favour of new green taxes will gather fresh momentum today with the release of a major report from the Green Fiscal Commission (GFC) calling for the introduction of up to £150bn of new green taxes.

The report, which is to be presented by chair of the government-backed climate change committee and head of the Financial Services Authority, Lord Adair Turner, will call for a once-in-a-generation shake-up of the tax system that would see income tax and national insurance contributions cut to be replaced by an increase in levies on carbon-intensive activities.

It will recommend that the proportion of green taxes in the overall tax take more than doubles from seven to 15 per cent by 2020 led by new taxes on energy, natural resources and other carbon-intensive activities.

Controversially, it also recommends a £300 tax on the least fuel efficient cars rising each year to £3,300 by 2020, while a new fuel duty "escalator" would see petrol taxes increase 10 per cent a year.

The report has cross-party support, with officials from each of the main parties having been involved in its development and Greg Barker, the Tory environment spokesman, Alan Whitehead, a Labour MP on the energy select committee and Chris Huhne, the Liberal Democrat home affairs spokesman, all due to speak at the launch of the report.

Paul Elkins, a professor at University College London and the author of the report, told the Observer that while some industries would be hit by green taxes, others would enjoy huge benefits as a result of cuts in other taxes. "Media reporting of these kinds of initiatives tends to concentrate on the losers but [the proposal from the GFC] is good news and puts money in the pocket of those who are not polluters," he said.

However, opponents to the report were already lining up yesterday with the Freight Transport Association and the Society of Motor Manufacturers and Traders both questioning the wisdom of new taxes in the middle of a recession.

The release of the report has been accompanied by a letter from green groups to the prime minister urging him to force the Treasury to take the report's recommendations seriously. Environmental NGOs have long accused the Treasury of blocking climate change initiatives and have repeatedly complained that the Labour government has overseen a fall in the proportion of green taxes since it took power.

"The Treasury has been a block on progressive action historically and the same is true today," John Sauven, executive director at Greenpeace, told the Observer. "We have written a joint letter to the prime minister because it is disgraceful that the Treasury theocracy is blocking a tax on bunker fuel [shipping or aviation fuel] that he himself supports. We fear the same could happen here [to the GFC report]. Yet green taxes are one of the critical planks in tackling climate change as far as we are concerned, although a key thing is to ensure that we safeguard social justice."

However, there is growing evidence that the concept of green taxes is winning support across the political spectrum. According to recent reports, the government is considering the introduction of a carbon tax on fossil fuel-based energy to help strengthen the case for investment in renewable energy and new nuclear plants, while David Cameron signaled recently a Conservative government would replace the climate change levy on corporate energy use with a carbon tax that applies only to energy from fossil fuel powered plants.