Britain and France have launched a campaign within the EU to slash VAT rates on products that are environmentally friendly.

The campaign is seen as a major move to combat climate change, but tax experts have warned that any such moves could be faced with major practical difficulties and lead to trade discrimination against third world countries, the FT reports.

Following talks with UK prime minister Gordon Brown, France's president Nicolas Sarkozy said the countries would press the EU to make the VAT cuts.

One major problem with the plan could be how to decide what products should receive the lower VAT rate. Biofuels, for example, help to cut emissions but are blamed for driving up food prices in the developing world.

Further reading:

The green accountancy report

'Green' reporting: nowhere to hide