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Ecotaxes are often proposed by [[Green politics|Green]] political parties and conservationist interest groups. <!-- I'd think this goes without saying, but I didn't want to delete it just yet.-->
Ecotaxes are often proposed by [[Green politics|Green]] political parties and conservationist interest groups. <!-- I'd think this goes without saying, but I didn't want to delete it just yet.-->


Tax shifting may include balancing taxation levels to be revenue-neutral for [[government]], [[industry]] or [[consumer]] groups.
Tax shifting usually includes balancing taxation levels to be revenue-neutral for [[government]] and to maintain overall progressivity.


Taxes on consumption may take the [[feebate]] approach advocated by [[Amory Lovins]] in which additional fees on less sustainable products&nbsp;&mdash; such as [[sport utility vehicle]]s&nbsp;&mdash; are pooled to fund [[rebate]]s on more sustainable alternatives&nbsp;&mdash; such as [[hybrid electric vehicle]]s.
Taxes on consumption may take the [[feebate]] approach advocated by [[Amory Lovins]] in which additional fees on less sustainable products&nbsp;&mdash; such as [[sport utility vehicle]]s&nbsp;&mdash; are pooled to fund [[rebate]]s on more sustainable alternatives&nbsp;&mdash; such as [[hybrid electric vehicle]]s.

Revision as of 22:45, 18 January 2007

Ecotax, short for Ecological taxation, can refer to:

  1. A fiscal policy that introduces taxes intended to promote ecologically sustainable activities via economic incentives. Such a policy can complement or avert the need for regulatory approaches. Often, such a policy intends to maintain overall tax revenue by proportionately reducing other taxes, e.g. on human labor and renewable resources, in which case it is known as the green tax shift towards ecological taxation.
  2. The Pigovian taxes that are introduced by such a policy - see below.

Taxes affected

Examples of taxes which could be lowered by a green tax shift:

Examples of ecotaxes which could be implemented or increased:

General remarks

Ecotaxes are often proposed by Green political parties and conservationist interest groups.

Tax shifting usually includes balancing taxation levels to be revenue-neutral for government and to maintain overall progressivity.

Taxes on consumption may take the feebate approach advocated by Amory Lovins in which additional fees on less sustainable products — such as sport utility vehicles — are pooled to fund rebates on more sustainable alternatives — such as hybrid electric vehicles.

The object of a green tax shift is often to implement a "full cost accounting", using fiscal policy to internalize market distorting externalities, which leads to higher efficiency and sustainable wealth creation.

Although ecotaxes or green taxes are often opposed by conservative groups (or proposed by environmentalist movements), they are not easily characterized in this way. Basic economic theory recognizes the existence of externalities and their potential negative effects. To the extent that green taxes correct for externalities such as pollution, they correspond with mainstream economic theory. In practice, however, setting the correct taxation level or the tax collection system needed to do so is difficult, and may lead to further distortions or unintended consequences.

Progressive or Regressive?

Some green tax shift proposals have been criticized as being fiscally regressive (a tax with a marginal rate that decreases as the taxpayer's income increases). Taxing negative externalities usually entails exerting a burden on consumption, and since the poor consume more and save or invest less as a share of their income, any shift towards consumption taxes is considered regressive. However, conventional regulatory approaches will affect prices in much the same way, while lacking the revenue-recycling potential of ecotaxes. Moreover, correctly assessing distributive impact of any tax shift requires specifics, eg. is the increase in the (moderately regressive) carbon tax more than offset by the decrease in the (highly regressive) payroll tax? Some proponents claim a second benefit of increased employment or lower health care costs as the market and society adjust to the new fiscal policy. These claims, as with the claim "tax cuts create jobs" are often difficult to prove or disprove even after the fact.

Ecotax policies enacted

An ecotax has been enacted in Germany by means of three laws in 1998, 1999 and 2002. The first introduced a tax on electricity and petroleum, at variable rates based on environmental considerations; renewable sources of electricity are not taxed. The second adjusted the taxes to favor efficient conventional power plants. The third increased the tax on petroleum. At the same time, income taxes were reduced proportionally so that the total tax burden remained constant.

See also

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