Courts handed out more than #3.5 million in fines and 11 years in jail last year for companies, directors and individuals who broke environmental laws, the Environment Agency revealed today.

Around 300 companies were prosecuted in 2006, including Thames Water and United Utilities Water, who topped the list with fines of #191,600 and #137,300 for water pollution.

A number of other water companies and waste firms were hit with large fines, while Rentokil, Shell, Porsche, Cable and Wireless and John Lewis were also prosecuted, the Spotlight report from the EA showed. And 29 company directors were among 318 individuals who found themselves in court for breaking the law.

But although fines rose by almost #1 million on the previous year, the agency called for harsher penalties for environmental crime - and additional powers to impose fines directly.

The EA’s chief executive Barbara Young said the average penalty was only #11,800 and fines could be "as low as one thousandth of a per cent of a company’s worth".

The Environment Agency also called for tougher emissions trading as fewer permits had been allocated to combat increasing greenhouse gas emissions.

"The law is there to protect our environment and so those businesses and individuals who think they can cut corners best watch out - we won’t tolerate it," Baroness Young said.

"Waste cheats, for example, make money from their crimes, pollute our environment and damage the legitimate law-abiding businesses. So the penalties need to reflect the seriousness of the crime."

She went on: "At the end of the day it pays to be green. Research shows that by adapting to climate change through improved efficiencies, businesses can save as much money as an equivalent 5% increase on sales.

"We all know too well that we have little time left to put the brakes on climate change and preserve our environment, so business as usual just won’t do."

While the agency said most of the sites it regulated have reduced releases of most air pollutants including lead and sulphur dioxide, greenhouse gas emissions rose around 1% and now accounted for 34% of total UK emissions.

Nitrous oxide output remained unchanged, mostly due to power stations, while the amount of waste companies generated had grown 40% since 2000.

The Spotlight report published today showed the waste sector overtook the water industry to accrue the highest level of fines, totalling #778,077 in fines of more than #5,000.

But 50% of the sites regulated by the Environment Agency in the chemical, energy, farming, food and drink, metals, minerals, nuclear, paper and pulp, waste, water and other sectors were given a grade A environmental rating.

And the agency said that overall, environmental performance of the industries it regulates was improving.