Green tax

Green tax

28 June, 2012
Does it work?
Making people pay for their emissions
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The idea of green taxation is to factor in the negative externalities such as environmental degradation in pursuit of economic prosperity. In other words, taxing people for the thing they do or purchase which have negative impacts, in this case on the environment, and diverting the funds toward public good. While green taxes concepts were suggested by British economist Pigou 90 years ago, green taxes are still not in the mainstream and still being discussed even to this day.
 
Finding solutions to the tragedy of the commons may involve taxation as an option, since people tend to hold back on consumption if it means paying more. Places with such taxes such as British Columbia in Canada, Switzerland, Italy and the Scandinavian countries are shifting taxes from taxing the good to taxing the bad. However, the idea of imposing a tax does not easily gain industry or political support because the burden falls directly on society. To complement green taxes with tax relief, especially for the financially less well-off, is important. By taxing those that pollute more intensely, there is also an incentive to improve on current technologies and behaviours, and shifting to alternatives that depend less on fossil fuels.
 
With the success of the sulphur dioxide emissions trading system in the US, carbon emissions trading has been gaining tremendous popularity, though the system is not implemented globally. While there is debate about whether it works best to adopt an emissions trading system or taxes, it may be that different regions with various political systems and environmental regulatory history choose to adopt the system that best suits the local jurisdiction. Looking at some examples in Asia, Singapore has a number of taxes on vehicles to urge less dependence on vehicles, including the infamous electronic road pricing systems as well as parking and fuel taxes. China also has consumption, vehicle and value added taxes on vehicles, but in recent years, rapid growth in wealth has caused a surge in car ownership and taxes have not been very successful curb it. It appears that for green taxes to be most effective, they would need to be supplemented by measures and instruments to complement the solutions to environmental problems like air pollution, climate change, waste and other issues.
 
At the Green Taxation in East Asia: Problems and Prospects event at Hong Kong University in January, Richard Cullen from HKU brought up the issue of status in different countries as well. The well-quoted case of driving in China to get across the road as a means of showing one’s status is seen as positively stupid in places like France where people of all classes can and do use public transport. Without the right options for civil society, in this case, public transport that offers convenience, comfort and accessibility, taxes will get a lot of backlash since alternatives are not offered but people are forced to pay more. To ensure that green taxes are effective and more easily accepted by society, it is necessary to create policies that support environmental protection such that taxes actually make a difference, ensure that funds are being invested back into the environment, and make a case for green job creation so that there is a balance between the supply and demand of labour in environmental sectors. Reasoning for green taxes must communicated clearly to both politicians and civil society in order to ensure support.
 

By: Ecozine Staff
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