Taxing polluters for a fairer, greener society: Joint civil society policy platform

This platform demonstrates broad, cross-sector support for the "polluter pays" approach to tackling the interconnected climate and cost-of-living crises.

We outline a suite of workable, evidence-based policies that the UK government could take to ensure those most responsible for climate breakdown pay their fair share and raise billions of vital revenue.

This would help ease the cost-of-living crisis for people in the UK while generating crucial funds for those grappling with climate disasters both at home and globally.

Context: The climate crisis is a cost-of-living crisis

Climate change is already costing each UK household £3,000 per year as extreme weather, crop losses and flooding drive up the cost of food, insurance and public services. In other words, the cost-of-living crisis is a climate crisis.

This relentless snowballing of prices and costs hits low-income families the hardest, and yet they are the least responsible for the pollution that drives climate breakdown.

Taxing polluters would help improve living standards for ordinary people, provide support for communities worst hit by extreme weather and incentivise the rapid adoption of cheap, secure, clean energy technologies.

Taxing the biggest polluters to pay for the damage they’ve caused – from the fossil fuel industry to the extremely wealthy – would not only raise billions, but is very popular with the British public, and even with some of the millionaires themselves.

Instead of cutting support to those in need, the government must stay true to the Prime Minister’s commitment that those with the broadest shoulders should contribute the most.

This briefing sets out a suite of policy options that would raise billions in vital public funds by ensuring that those most responsible for climate breakdown are paying their fair share.

Who should pay for the costs of climate change, and why?

Big oil and gas companies

Emissions from fossil fuels are the dominant driver of climate change, and major oil companies have extracted trillions in profit from driving this destruction.

They can afford to pay. From UK production alone, international oil firms have made £5 billion in profits each year for the last 30 years on average. That means that each year, UK oil and gas production makes almost nine times more in profit than the total amount pledged to the Fund for Responding to Loss and Damage.

They can’t deliver growth for Britain, but renewables can. Since 2015, the UK fossil fuel industry has cut nearly 30% of its workforce, despite low taxes, generous subsidies and hundreds of new licences. Instead of investing in renewable energy, where there’s real opportunity for growth and jobs, oil and gas companies are backtracking on their commitments to invest in clean power and doubling down on fossil fuels.

They are costing communities trillions. Carbon emissions from the world’s biggest 25 oil companies caused an estimated £15 trillion worth of economic damage globally from 1985 to 2018. The costs of this damage are falling disproportionately on those least able to pay, as struggling UK families face higher prices, lower wages and vulnerability to climate shocks like floods and heatwaves – while communities in low-income countries, who have contributed least to the crisis, suffer the most severe and immediate impacts.

The ultra wealthy

We’re only talking here about the very richest people in society, whose millions in wealth are often taxed more lightly than income from work, meaning they get richer at a faster rate.

They are central drivers of climate change. The uber-wealthy are accelerating the climate crisis through excessive consumption and harmful investment choices. The 50 wealthiest billionaires produced more carbon last year in just three hours than the average Brit does in an entire lifetime.

They’re getting richer, while inequality soars. In 2024 alone, global billionaire wealth surged by £2 trillion – three times faster than the year before – further concentrating wealth and worsening inequalities within countries and between the Global North and South. The Joseph Rowntree Foundation found that by 2021, the top 10% of the UK’s population owned an enormous 57% of the country’s wealth, while the bottom 50% owned less than 5%.

They benefit massively from the UK’s unjust tax system. The UK already has one of the most unequal tax systems globally. It favours the super-rich with unfair loopholes, and taxes work at a higher rate than wealth, fuelling inequality. In 2023, then Prime Minister Rishi Sunak, from one of the UK’s 250 richest families, paid just 23% tax on his £2.2 million earnings – less than a teacher.

What are the options for climate taxation?

By reforming the tax system to align with climate goals, the UK can raise vital funds to invest in a greener, fairer society and pay for the costs of climate change – costs that UK voters, and frontline communities across the globe, are already paying.

As the Tax Justice Network highlights, effective climate taxation must be progressive, inclusive and transparent – designed to address global inequalities and redistribute wealth fairly.

We have set out the following menu of policy options as instruments to raise money from the very wealthiest and most responsible for climate damage.

These measures must:

• Protect our communities and homes against the costs of climate change
• Support a fully just transition
• Increase the UK’s contribution to international climate finance
• Disincentivise investment in fossil fuels
• Improve public services and living standards

Taxing big oil and gas companies

Introduce a permanent excess profits mechanism on top of baseline tax of North Sea oil and gas companies. Instead of a cycle of raising and cutting headline tax rates, the UK must introduce a permanent mechanism that captures all excess profits, including windfalls, and close all loopholes which encourage further investment in oil and gas.

Add a tax on shareholding in fossil fuel companies. Levies on capital gains, dividend payments and transactions of polluting assets would disincentivise investment in fossil fuels, drive progress towards the UK becoming a clean energy superpower, and redistribute wealth from super-rich shareholders to workers and UK households.

Establish a Climate Damages Tax to raise £20 billion over 10 years. A ratcheting extraction levy on oil and gas production would enable a managed transition away from North Sea oil and gas while generating crucial funds for climate damage response and worker transition programmes.

Remove and redirect subsidies for North Sea oil and gas companies to raise £2.2 billion a year. The Exchequer is still directly subsidising fossil fuel companies via tax relief for exploration and new fields, decommissioning relief deeds and Research and Development tax relief on extraction tech. Ending these handouts would have saved UK taxpayers £2.2 billion in 2022 alone.

Taxing the super-rich

Tax wealth as much as work. National Insurance is currently levied against income from work, but not earnings from investments like dividends and rental income. This nonsensical situation means that landlords – currently earning outsized profits during a housing crisis – often pay a lower tax rate than tenants whose only source of income is their job. Ending this disparity could raise an estimated £10.2 billion a year while also simplifying the tax system by ensuring that all forms of income, whether from work or wealth, are taxed at the same rate.

Reform Capital Gains Tax, one of the most economically inefficient and unfair taxes in the UK. Comprehensive updates that close loopholes, equalise with income tax and protect legitimate investments could generate £12 billion annually, while also accelerating economic growth – all while receiving broad cross-party support.

Introduce a 4% tax on share buybacks. UK firms are currently buying back shares at a faster rate than even their US counterparts, often to avoid paying taxes. A 4% levy on share buybacks could raise between £100 million and £2 billion during this year alone, while incentivising real investment in productive enterprise rather than shareholder profiteering.

Implement a 2% tax on assets over £10 million. An asset tax on the 20,000 or so UK residents worth more than £10 million has strong and growing support across the political spectrum, from the unions to the FT, as well as nearly two-thirds of UK millionaires themselves. And it would raise some £24 billion per year, in a progressive, efficient and easily-implemented manner.

Properly tax private jets and frequent fliers. Private jet usage is surging, with the UK having more private flights than any other European country, now accounting for one in 10 departures from UK airports. Yet aviation, including private aviation, is exempt from fuel duty and VAT. Ending what are effectively subsidies to the super-rich to fly more could raise £1.2 billion a year, while reducing demand for this high polluting and deeply unnecessary mode of travel.