Review and reform the devolved and local tax systems to fairly raise significantly more revenue to invest in faster climate action and adaptation, and to incentivise emission reduction
The Scottish Government estimates that climate change is already costing our economy billions of pounds. This could rise to 7% of GDP – over £100 billion – by 2030 if we do not act to reduce emissions and adapt. In contrast, billions of pounds could be added to the economy by a successful green transition.
As recommended in the SCCS Financing Climate Justice report, progressive use of general taxation should be the primary means to raise significant additional money fairly to invest in climate action and tackle injustice. This approach should reflect the ‘polluter pays’ principle, with evidence showing that, on average, those with higher incomes and wealth have higher emissions. In 2023, Oxfam estimated that the richest 1% of the world’s population produced as much carbon pollution in 2019 as the five billion people who made up the poorest two-thirds of humanity combined.
Separate analysis in Scotland by Future Economy Scotland shows the average carbon footprint of the richest 5% of households in Scotland is 4.1 times greater than the poorest 5% of households. This analysis emphasises the disproportionate climate impact richer people have through their lifestyle choices, including through frequent flying. Targeting higher incomes and wealth would not only be a means of making polluters pay but, given these individuals also have the greatest capacity to pay, it would also promote social justice.
As argued by the Tax Justice Scotland campaign, the tax systems at Global, UK and Scotland levels must play a much bigger role to support the response to the climate crisis and improve public services. This includes fairly raising significantly more revenues and using taxation to incentivise behavioural change. Fiscal policy should complement regulatory interventions to incentivise and compel greener behaviours.
Joining global initiatives like the Global Solidarity Levy Task Force would show leadership and help unlock further global funding which makes polluters pay for climate damages.
Concrete options – nationally and locally – must be set out to help raise significantly more revenue to invest in fairly delivered climate action. These reforms should reflect the clear evidence that, on average, the richer you are, the more you pollute.
An area long overdue for reform is Council Tax. There has been a consensus for many years across parties, academia and civil society that the current Council Tax system is unfit for purpose. A poorly designed tax from the outset, its flaws have only deepened as time has gone on. The cross-party Commission on Local Tax Reform recommended in 2015 that “the current system of Council Tax must end”. Public support for reform is strong and growing. Polling consistently shows that voters want a fairer system where wealthier households contribute more.
Despite a constantly worsening financial situation for Scotland’s local councils, the current Council Tax system stubbornly persists. Failure to progress reform is having severe consequences for the public services and amenities we all rely on – the regressive and inflexible nature of Council Tax makes it difficult for councils to use it as an effective tool for funding public services, as well as local climate action.
Council Tax should be replaced with a Reformed Property Tax, as part of a progressive basket of local taxes to fairly boost revenues. This replacement tax should be truly local, proportional to property value, based on periodically reviewed valuations, and flexible to individual household circumstances.
Meanwhile, existing Scottish Government commitments to ‘explore’ how devolved taxes can help drive behavioural change are positive but must progress quickly – including reforms to existing mechanisms, e.g., non-domestic rates – and wider tax innovation that drives emissions reduction.
For more information:
• Outdated and Unfair: The Case for Council Tax Reform, Tax Justice Scotland, 2025
• Scottish council tax: ripe for reform, Institute of Fiscal Studies, 2025