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Money raised from taxing the carbon emissions of new developments in Milton Keynes is being spent on upgrading the energy efficiency of existing homes.

Under the initiative, developers pay into a fund according to the additional carbon emissions generated by their buildings in return for planning permission. The tax payable on an average house is 拢400, but if a scheme is carbon neutral, developers do not pay anything.

The scheme was introduced in April 2007, but the money has only just started filtering through as it is not payable until buildings are completed. According to the council, 拢250,000 has been raised from 10 schemes, which is enough to insulate 1,000 homes.

The council has set up a not-for-profit company to administer the scheme, which offers cavity wall and loft insulation at the subsidised price of 拢95 per item.

Forty-one homes have been insulated so far and the council said it had had 300 enquiries. It anticipates raising a total of 拢400,000 by next April, including from a Taylor Wimpey development, and hopes the scheme will raise 拢800,000 a year, although it expects the credit crunch to affect this target.

Martin Davies, the carbon manager at Milton Keynes council, said the scheme was a cost-effective way of reducing overall carbon emissions from buildings. He said: 鈥淭hat was one of the key arguments for introducing the policy.鈥�

He added that developers were not happy about the tax but could see the reasoning behind it.

Alan Budden of PRP Architects, which has an office in Milton Keynes, said: 鈥淚 think it鈥檚 the way to go. It is more beneficial financially when you get to levels five and six of the Code for Sustainable Homes.鈥�

This is not the first innovative development tax Milton Keynes has introduced. In April last year, the council鈥檚 鈥渞oof tax鈥� was given the green light. Under the scheme, considered an alternative to the planning gain supplement, developers pay 拢18,500 per home and 拢105,300 per acre to fund infrastructure.