Scottish Aggregates Levy: evidence review and policy options
Research reviewing, modelling and analysing illustrative options for a Scottish specific Aggregate Levy.
A main aim of this research project was to analyse various policy options for implementing a Scottish Aggregates Levy. In doing so, we have undertaken a brief review of the UK Aggregates Levy and similar taxes in other European countries. We have also developed a case study on Northern Ireland and the issues related to cross-border aggregates movements noted there would be highly relevant to Scotland. To understand the current aggregates market in Scotland along with the potential reserves of primary aggregates, we have conducted a market analysis based on latest available data and expert interviews though acquiring the latest data has been particularly challenging given the discontinuation of various aggregates-related surveys. Finally we have developed a detailed options appraisal model to analyse the potential economic and environmental impacts of selected illustrative policy options for implementing the Scottish Aggregates Levy.
Below we present the preliminary conclusions of this research, which were finalised after the presentation of the final results and discussion with the project governing team at Scottish Government.
- Analysis of the UK Aggregates Levy and similar taxes in other countries suggests that the Scottish Aggregates Levy is likely to be more effective in terms of reducing the demand for primary aggregates and increasing recycling of C&D wastes, when it is used in conjunction with landfill or waste disposal taxes;
- If the objective is to protect the domestic aggregates producers against international suppliers, imports of aggregates to Scotland will need to be levied at a similar rate as domestic extraction while exports will need to be exempted. On the other hand, to disincentivise domestic extraction in favour of imports, aggregates imports could be exempted from the levy, while applying the levy on domestic extraction and export of aggregates.
- As observed in the Northern Ireland (and Republic of Ireland) case study, implementing a different levy rate in Scotland compared to the levy rate in England will be likely to increase illegal cross-border movements of aggregates, and therefore a stricter monitoring and enforcement regime will be required to minimise the illegal cross-border trade.
- The market analysis revealed that aggregates production seems to be following a declining trend over the past few years, especially for sand and gravel. Moreover, the econometric forecasting of the aggregates production suggests that the declining trend will likely continue over the next few years as well, although econometric forecasts are always subject to a degree of uncertainty in the wider economy as well as the construction industry.
- Modelling of illustrative policy options for the Scottish Aggregates Levy suggests that the most effective policy option for maximising the levy revenue and the production of recycled aggregates, while minimising the externality impacts of primary aggregates production, is to increase the rate of the (current UK) levy in Scotland.
- Finally, it was estimated that the recycling rate for C&D waste in Scotland is already very high (about 87%). However, it should be noted that some of the recycled aggregates are currently being utilised in low value uses of aggregates (e.g. pipe bedding or backfilling) due to various restrictions on use of recycled aggregates in concrete production and/or presence of various exemption for the landfill tax for inert waste. In order to increase the substitution of primary aggregates with recycled aggregates, further incentives will be needed through revising some of the exemptions of the landfill tax for inert materials, while introducing minimum quality restrictions on recovery of C&D wastes.
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