International taxation and environmental protection

Abstract

Building upon the existing literature, this Chapter shows that international tax law might have either positive or negative effects on the protection of the environment. First, this Chapter discusses the positive effects that international tax law could have on environmental protection if global environmental taxes were to be adopted. Second, by means of three concrete examples, this chapter analyzes three types of negative effects that international tax provisions might have on environmental protection. The international tax provisions that apply to the aviation sector are used as a first example to show that international tax law can cause a country’s tax system to be or remain disconnected from or inconsistent with its environmental policy agenda, which is problematic. Then, the case of environmental border tax adjustments is used to show how international tax provisions are sometimes used as an argument against the adoption of innovative domestic or regional tax measures that would allegedly help foster environmental protection. Finally, a third potential negative effect of international tax law on environmental protection is discussed through the example of emissions trading schemes, to highlight how double tax treaties might affect their effectiveness. This Chapter concludes that the interactions between international tax law and environmental protection need to be acknowledged and that coordination is key to ensure that international tax law does not undermine the legislator’s efforts to protect the environment.