Environmentally-related Taxes Research Articles

Pollute less or tax more? Asymmetries in the EU environmental taxes – Ecological balance nexus

This paper examines the impact of environmentally related taxes on environmental performance in the EU-15 countries during the period of 1995–2016 by utilizing an innovative non-linear model, which is the panel smooth transition regression (PSTR) model. Although the effectiveness of environmental taxes has been discussed before, the potential effects of these taxes on ecological balance sheets as a measure to reflect human pressures on the environment/ecosystem have not been fully investigated. This paper, therefore, deals with total ecological balance and its main components, which are based on the major types of ecologically productive areas such as cropland, grazing land, forest area, and fishing grounds. The results indicate that revenues from environmentally-related taxes as a share of GDP significantly lower the ecological deficits after exceeding a certain threshold level, but not cropland balance accounts. Thus, well-designed environmental taxes on the optimal level have the potential to reduce environmental problems/ ecological imbalance, if not implemented in conjunction with policies such as tax exemptions, refunds or tax allowances that limit their impact.

Sustainability in the Anthropocene: Between Extinction and Populism

The pursuit of environmental sustainability has been affected by two significant developments in the last years. On the one hand, the Anthropocene hypothesis suggests that the human impact on the environment has increased to such a degree, that natural systems are now disrupted at a planetary level. The most dangerous manifestation of the Anthropocene is climate change, where there is need for greater urgency in the face of insufficient climate action. There are a number of scientists who currently warn of the possibility that failing to reduce the concentration of greenhouse gases in the atmosphere may render the Earth uninhabitable in the first place. A first goal of this paper is thus to ponder how the sustainability paradigm may be affected in the face of this threat and whether, in fact, sustainability may be displaced by “habitability”. On the other hand, some climate policies are eliciting the reaction of a populist movement—from Trumpism to the gilets jaunes in France—that opposes the rise of environmentally-related taxes and denies climate change or questions the severity of its effects. Both as a concept and as a policy goal, sustainability thus finds itself under double pressure: as it must focus on keeping the planet inhabitable, while the political opposition to measures directed towards decarbonization also increases. In what follows, the paper suggests that sustainability should be understood as a technocratic project to keep the planet safe for humanity rather than imposing a new way of life for all its inhabitants. This is not to imply that moral or ideological debate is to be curtailed, but rather to differentiate between achieving environmental sustainability and seeking the reshaping of socionatural relations.

Are Environmentally Related Taxes Effective?

This paper focuses on the question of whether the magnitude of long-established environmentally related taxes (ERT) is related to countries environmental performance. While environmental taxes efficiencies have previously been discussed, those taxes contribution to reducing pollution and improving environmental quality has not been fully explored. This paper therefore analyzes the effectiveness of environmental taxes by examining the environmental performance of 50 countries from all regions in association with the amount of revenues from environmentally related taxes each country collects. Using a cross-section regression and a panel dynamic regression, the paper finds that countries with higher revenues from these types of taxes also exhibit higher reductions in CO2 emission, PM10 emissions, and energy consumption and production from fossil sources.

Pruning the Money-Tree to Ensure Sustainable Growth: Facilitating Sustainable Development Through Market-Based Instruments

There is growing global recognition that market-based instruments (MBI), such as environmentally-related taxes, levies and user-charges, are viable tools for facilitating environmental management and, ultimately, sustainable development. These instruments seek to correct market failure to value, or accurately value, environmental goods and services that consequently lead to environmental concerns being accorded insufficient consideration in everyday market activities. South Africa has introduced various MBI, largely in the form of environmentally-related taxes pertaining to mining, agriculture, electricity supply, water supply, waste water discharge and various products such as fuel and plastic shopping bags. The primary rationale underlying the introduction of these instruments has been revenue generation. Government has, however, acknowledged that MBI have potential to achieve other objectives, namely to mould human behaviour, encourage more efficient resource use and improve actual environmental outcomes.In an effort to facilitate further debate on the issue, the National Treasury recently published a draft policy paper titled A Framework for Considering Market-Based Instruments to Support Environmental Fiscal Reform in South Africa. The Draft Policy Paper reflects a significant shift in fiscal policy and provides four broad tax reform options that could contribute towards meeting both fiscal and environmental objectives, namely: reforming existing environmentally-related taxes and charges in the transport and solid waste sectors; introducing new environmentally-related taxes in the electricity and waste water sectors; reforming legal aspects of non-environmentally-related taxes with perverse environmental incentives and creating incentives to improve environmental outcomes. This article briefly considers each of the above options set out in the Draft Policy Paper by focusing on the following questions: Why has there been a shift toward the use of MBI to achieve environmental outcomes? To what extent are they used currently in South Africa? What are the options for extending their use in South Africa? What are the prerequisites for their successful implementation?

Environmental Policy Design and the Fragmentation of International Markets for Innovation

It has long been argued that the implementation of market-based environmental policy instruments such as environmentally-related taxes and tradable permits is likely to lead to greater technological innovation than more direct forms of regulation such as technology-based standards. One of the principle reasons for such an assertion is that they they give firms greater 'flexibility' to identify the optimal means of innovating to meet the given environmental objective. Thus, it can be argued that the benefits of (some) market-based instruments can also be true of well-designed performance standards. While the theoretical case for the use of flexible policy instruments is well-developed, empirical evidence remains limited. Drawing upon a database of patent applications from a cross-section of countries evidence is provided for the positive effect of 'flexibility' of the domestic environmental policy regime on the propensity for the inventions induced to be diffused widely in the world economy. For a given level of policy stringency, countries with more flexible environmental policies are more likely to generate innovations which are diffused widely and are more likely to benefit from innovations generated elsewhere. And while the focus of this paper is on the specific case of environmental policy, the discussion is equally applicable to aspects of product and labour market regulation which have implications for technological innovation, such as product and workplace safety.

Environmental Policy Design and the Fragmentation of International Markets for Innovation

It has long been argued that the implementation of market-based environmental policy instruments such as environmentally-related taxes and tradable permits is likely to lead to greater technological innovation than more direct forms of regulation such as technology-based standards. One of the principle reasons for such an assertion is that they give firms greater „flexibility‟ to identify the optimal means of innovating to meet the given environmental objective. Thus, it can be argued that the benefits of (some) market-based instruments can also be true of well-designed performance standards. While the theoretical case for the use of flexible policy instruments is well-developed, empirical evidence remains limited. Drawing upon a database of patent applications from a cross-section of countries evidence is provided for the positive effect of „flexibility‟ of the domestic environmental policy regime on the propensity for the inventions induced to be diffused widely in the world economy. For a given level of policy stringency, countries with more flexible environmental policies are more likely to generate innovations which are diffused widely and are more likely to benefit from innovations generated elsewhere. And while the focus of this paper is on the specific case of environmental policy, the discussion is equally applicable to aspects of product and labour market regulation which have implications for technological innovation, such as product and workplace safety.

Tax Systems in European Union Countries

The tax-to-GDP ratio rose steadily in most EU countries up to the late 1990s, largely reflecting a sustained expansion of public sector commitments to welfare provision. Since the late 1990s, many EU countries have cut tax rates. However, the tax burden in the EU area remains much higher than in most other economies. The tax mix is also different, with high tax wedges on labour and a stronger reliance on consumption and environmentally-related taxes. Recent measures targeted at lowering the tax burden on labour, in particular at the lower end of the income scale, have had promising results in terms of employment growth, showing how tax design is an important influence on countries' performances. While there is not much room for cutting taxes significantly without downsizing public spending, further rebalancing the tax burden away from labour could contribute to better employment performance. Greater reliance on property taxes, which are low by international standards, could be envisaged. In addition, reconsidering the extensive use of reduced VAT rates and tax incentives targeted to specific saving vehicles could raise the yield of consumption and capital income taxes, respectively, while reducing non-neutralities of the tax system. Finally, the free movement of goods, people and capital within the EU area, combined with the advent of the single currency, has also affected the design of national tax systems and has brought to the fore a number of international taxation issues. Thus, EU countries' experience in reforming their tax system may provide useful insights for other countries and regions where international integration is deepening.