The House of Lords Science and Technology Committee has asked the UK government to consider introducing lower VAT rates for firms using "sustainable materials and less virgin raw resources".
The move will come as a boost for prime minister Gordon Brown, who first proposed such a tax cut more than a year ago in a joint statement with French president Nicolas Sarkozy.
In response to the Lords report, a Treasury spokesman said: "The government has been engaging constructively at EU level for more widespread application of reduced VAT rates to energy-saving and energy-efficient products. "
The recommendation forms part of a waste reduction report which aims to reduce company and public sector waste and encourage businesses to adopt greener strategies.
Another recommendation would see reduced VAT on the repair of products to encourage more sustainable consumption.
"We would like to see the VAT regime reformed so that products that have a long lifecycle, or can be easily and cheaply repaired rather than replaced, are made economically more attractive," said Lord O'Neill, chairman of the Lords Science and Technology Sub-Committee on Waste Reduction.
"This would be an important step in turning away from the throwaway consumer culture we currently have."
The Lords report also called on the government to introduce "individual producer responsibility" that would encourage companies to take waste reduction more seriously.
The study points to electronics manufacturers that have already asked to be held responsible for their own waste to ensure that their own good practice is not undermined by companies making less of an effort.
The committee added that government funding to environmental business support bodies should not have been reduced, and that a set proportion of landfill tax revenue should be used to fund waste reduction initiatives.
Mike Webster, a spokesman at environmental organisation Waste Watch, said the most important aspect of the report is the effect that a reduced tax on repair services would have on manufacturers.
"Currently a lot of people cannot justify spending a huge amount on a product just because it lasts longer," he said.
"But if this recommendation is followed through it should encourage modern electronics manufacturers to produce fewer obsolete products."
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