Why is Environmental Tax Important?


Chris Lenon Environmental TaxFor some time I felt like a lone voice on environmental tax, perhaps because it may appear more important for some sectors than others or a more immediate concern.

European countries have signed up to carbon reduction targets which will (with growth) require the decarbonisation of the economy by 2050. To achieve these targets all sectors and businesses will be affected. Governments are also focused on the removal of “carbon subsidies” as part of this process.

These ambitious targets need to be approached in a way which maintains the global competitive position of Europe.

While the price of carbon fluctuates, there is a temptation to avoid the issues. Instead, what is needed is to develop a framework which will work and facilitate economic development and the transition to a lower carbon environment.

Tax Policy

Environmental fiscal policy should reflect and compliment energy and environmental policy, but it also needs to be effective within the wider fiscal policy.

  • Is the policy aim to achieve environmental or energy aims or primarily to raise taxes? This is key to design.
  • Is the aim to produce a consistent cost for energy or environmental externalities across all users?
  • How can the competitive position of energy users be maintained in a world without global policies and agreements?