Research and analysis

Executive Summary: Evaluation of the Landfill Tax on Environmental Outcomes

Published 25 June 2025

Prepared by Ipsos and UCLC for HM Revenue and Customs. The views in this report are the authors’ own and do not necessarily reflect those of HM Revenue and Customs

HMRC Research Report: 827

1. Executive Summary 

HMRC commissioned Ipsos and UCL Consultants (UCLC) to undertake a study into the impact of environmental taxes. This work was split into two phases. Phase 1 outlines the causal pathways through which the introduction or changes to taxes might lead to environmental impacts. Based on these theoretical foundations the paper presents a framework and practical guidance for evaluating the environmental impact of taxes.  This framework is intended as a toolbox to support the design of both ex-ante and ex-post impact evaluations. It is important to note that the feasibility of any set of evaluation approaches depends heavily on the context and specific characteristics of the tax or tax change being evaluated. Phase 2 progressed empirical work on the Landfill tax and an investigation on the methodology and data requirements to assess the impact of the Climate Change Levy and its related Climate Change Agreement. This work has split into two papers.  

• Landfill tax: empirical work was completed in full detailing a proposed methodology and impact assessment; this work is detailed in the below paper.   

• Climate Change Levy: due to data limitations the Climate Change Levy and its related Climate Change Agreement empirical work was not completed, however the proposed methodology and outline of available data are detailed in a separate paper. 

Throughout each report any limitations of the methodologies and data have been outlined.  

In the UK, the Landfill Tax (LfT) was introduced on the 1st of October 1996 to promote the diversion of waste materials from landfill and make alternative treatment options comparatively more competitive, such as recycling and recovery, thus supporting waste and resource policy objectives. The tax was designed with two rates. The standard rate increased initially through a series of escalators and since 2014 it has increased in line with the retail price index (RPI). The standard rate is applicable to ‘active’ waste, or waste that would decay and degrade over time, and the lower rate applies to less polluting material. Since the introduction of the tax, there have been important developments in the wider environmental policy area and a commitment to decarbonisation and transitioning towards a Circular Economy, which have helped in strengthening waste and resources regulatory frameworks. While the existing literature seems to suggest a positive link between the increase in the cost of landfilling through landfill taxes and landfill diversion, empirical studies in the UK are limited, outdated, and restricted to studying the impact of landfill tax on Municipal Solid Waste (MSW). The following section summarises the key findings of the impact evaluation study of the UK Landfill Tax. 

This impact evaluation study encountered several limitations that are important to consider, these are outlined below: 

Lack of pre-intervention data: The study lacked data on waste management practices before the LfT was implemented. The absence of pre-treatment data made the application of quasi-experimental data unfeasible, hence an alternative approach was carried out. This means that we are not directly able to establish causal relationships in the way we could with, for example, randomised controlled trials.  Instead, we are establishing the extent to which changes in LfT rates are associated with changes in the various outcomes of interest and applying statistical tests to single out where these associations are statistically significant.  

Data availability for specific waste streams: Data on Commercial and Industrial (C&I) waste and Construction and Demolition (C&D) waste was only available at the national level (England and the UK) and for specific years (2010, 2012, 2014, 2016 and2018). This limited the analysis of the LfT’s effects on these specific waste streams at the local authority level. 

Inability to account for all external factors: While the study model considered policies and activities within its timeframe, it could not fully account for those implemented before 2010 (like the Aggregates Levy) or those lacking precise data. These unaccounted factors could influence the study’s outcomes and represent a limitation. 

The study looked at three main types of waste: Municipal Solid Waste (MSW), C&I waste and C&D waste. For each of these types of waste the study assessed the impact of the standard and lower rate. The data set covered the time-period of 2005 to 2020 for MSW and 2010 to 2018 for C&I and C&D waste. The overall results point to a strong positive impact of landfill tax on landfill diversion for all types of waste analysed, as anticipated based on the main purpose of the tax, with the exception of LfT lower rate on C&I and C&D waste, where the results were inconclusive. The study also analysed the impact of LfT on waste generation and alternative disposal routes (for example recycling, waste to energy and incineration). These latter results are more nuanced and will be discussed for the specific categories below. The methods for assessing the impact have been adapted to the nature of available data, which is different for MSW and the other categories, and thus the results are reported in standardised values for MSW (tonnes of waste diverted from landfill from an increase of £1 in the standard rate) and logarithms (% change for an increase of £1) for C&I and C&D waste.  

Findings related to MSW show that a £1 increase in LfT at the standard rate is associated with an average reduction of 2,079 tonnes in the waste disposed of in landfill for each local authority. The findings also indicate that as a result of the tax and consequent landfill diversion, there is an increase in waste sent to alternative treatment and disposal routes, including incineration, recycling and other recovery processes.  

Expanding on previous studies, the analysis considered the effects of LfT on C&I and C&D waste. For these cases, the results were split into three main types of impacts: (1) impact on waste generation, (2) impact on waste treated, and (3) impact on choice of treatment routes. Additionally, for each category, the waste charged by LfT standard and lower rates have been separated by waste codes, allowing for a more accurate evaluation of the impacts of these rates. To do this within the study methodology, waste codes were assigned to standard or lower rates. While this is a simplification because there is not a full alignment between waste codes and rates, assumptions were made to assign codes to a single rate that are likely to be subjected to either the standard or the lower rates. Assigning waste codes to a single rate resulted in an improvement of the fit of the model and more consistent results.  

In terms of waste generation, the results show that a 1% increase in LfT at the standard rate leads to a 0.72% and a 0.15% decrease in C&I and C&D waste generation, respectively. The findings also indicate that the same increase in LfT lower rate leads to a 0.09% and a 0.05% reduction in C&I and C&D waste generation, respectively. Overall, the findings suggest LfT has a significant effect on the reduction of waste generation for C&I and C&D waste. 

In terms of landfill diversion, the findings indicate that LfT standard rate has been very effective in achieving the main purpose of the tax, that is, to reduce waste sent to landfill. The results show that a 1% increase in LfT standard rate reduces C&I and C&D waste sent to landfill by 0.68% and 2.7%, respectively. On the other hand, the results are not conclusive for LfT lower rate, as they suggest they have not led to landfill diversion (the results show a 1% and 0.23% increase in C&I and C&D wastes sent to landfills due to a 1% increase in LfT lower rate2), although this may well be explained by factors beyond the scope of the project.  

While LfT’s main purpose is diverting waste from landfill, the data allowed for an evaluation of the possible effects on specific recovery routes, as defined in waste statistics: (1) recovery with backfilling, (2) energy recovery and (3) recycling (recovery excluding Energy recovery and backfilling). Here the results are not consistent with those for MSW, and they show lack of strong evidence that LfT incentivised recovery routes.  

For recovery (including backfilling), there is no conclusive impact of the effect of LfT. While the Backfilling route is mainly relevant for waste taxed at the lower rate, limitations in the data set did not allow backfilling to be considered in isolation of other recovery routes for detailed analysis. When looking at the results, for recovery including backfilling, the findings suggest that an increase of 1% in LfT standard rate led to an increase of 4.94% and 4.09% of C&I and C&D waste directed to this route, respectively, while LfT lower rate led to 9.17% and 5.76% decrease in recovery including backfilling for C&I and C&D, respectively. As for recycling (recovery excluding backfilling), a 1% increase in LfT standard rate was found to decrease C&I and C&D waste sent to recycling (excluding backfilling) by 0.11% and 0.19%, respectively. However, the same change in LfT lower rate increased C&I and C&D waste sent to recycling by 1.91% and 0.97%, respectively. Note, however, that the results may be shaped by the fact that the landfill tax has had a positive impact on waste prevention, which may explain the reductions in the volume of waste sent for recycling. With regards to energy recovery, the model tested the effect of LfT on energy recovery. Given the low calorific value of most of materials contained in C&D waste, there was a limited number of observations for the evaluation of the impact of LfT lower rate on the energy recovery route, meaning it was not feasible or adequate to include in the analysis. The effects of LfT standard rate on C&I and C&D waste sent for energy recovery indicate that a 1% increase in LfT standard rate led to a reduction in C&I waste sent to this route by 0.64%, however it increased C&D waste sent to this route by 0.47%. As mentioned before, this mixed effect could be a result of the fact that the C&I waste is mostly taxed at the standard rather than the lower rate and again the reduction may be shaped by the effect on waste prevention. All these findings seem to suggest a lack of conclusive evidence of LfT promoting options higher up in the waste hierarchy, as some of previous empirical analysis undertaken in the literature suggests.  

To conclude, the results showed a statistically significant effect of LfT on waste diversion across all different types of waste, with the exception of C&I and C&D waste at the lower rate. The results on other impacts explored in the study on waste prevention and promotion of recycling are less consistent and, therefore, deemed inconclusive. LfT has been implemented not in isolation but as part of a package of policy measures that tries to encourage forms of waste treatment that better align with resource conservation and, more recently, Circular Economy principles. Availability, price and technological adequacy of alternative treatment options are important determinants of landfill diversion potential. Since its introduction in 1996, commercial organisations and public bodies, have introduced changes to improve the way they manage their waste, following the waste hierarchy principle.3 While the study has controlled for several variables, there are always limitations in capturing all variables affecting complex behaviours such as landfilling and waste treatment over such an extended time period.