"If we are to move beyond efficiency there is a need to use fiscal incentives as part of a package of measures to engage householders," the report said.

It noted that not only did domestic buildings produce one quarter of all emissions of so-called greenhouse gases from burning fossil fuels, but households consumed more than half of the country's water and produced 10 percent of the waste.

The Green Alliance, which counts academics, environmentalists and businessmen among its membership, aims to persuade the government to produce integrated environment and economic policies.

The government is drawing up a new energy policy that must meet its international obligations to slash emissions of gases like carbon dioxide and fill a huge gap in electricity output when its ageing nuclear plants close in the next few years.

Wednesday's report said that while the new energy policy would set out to tackle electricity supply, its green tax proposals would go some way towards helping curb booming demand.

"The UK's Sustainable Development Strategy commits to 'living within environmental limits,'" it said. "But use of energy, water and waste in the household is already far beyond these limits, and on an upward trajectory."

It proposed rewarding households which install insulation or increase energy efficiency by cutting their local taxes.

Nationally, domestic water meters should be brought in to curb usage - a topical issue as Britain faces its worst drought in more than 20 years.

To encourage recycling, local councils should also start to charge households according to the amount of unsorted garbage they threw out.

The report also proposes measures which discourage environmentally damaging behaviour, such as charges on products like disposable batteries and cameras, garden sprinklers and high-energy light bulbs.