Retailers are calling on the Government to scrap VAT on energy efficient appliances and offer incentives to trade in old white goods for more environmentally friendly ones.

The British Retail Consortium is recommending a version of the car scrappage scheme for white goods, including a reduction in the tax paid on new appliances in order to help households cut their fuel bills and generate lower emissions.

In its pre-Budget report submission to the Chancellor of the Exchequer, the BRC argues that the proposals help the fight against climate change, support jobs in the retail sector and bring a boost to the struggling high street.

If VAT was removed from the most energy efficient appliances, the BRC says 1.3 million tonnes of CO2 emissions could be cut each year by 2020 - the equivalent of nearly 1% of domestic emissions.

The BRC study puts the price of the initiative at around £507 million a year in lost VAT receipts, or the cost of just a fortnight of the VAT reduction that was introduced in December of 2008.

BRC director general Stephen Robertson said: “Retailers are already doing their bit to cut carbon but homes are responsible for 27% of the nation’s emissions. Helping householders improve their performance has to be the next step.”