Green Tax
March 14, 2009
Whether or not one sees global warming as a phenomenon caused by immoderate pollution from human activity, it is hard to disagree with the suggestion that environmental pollution is affecting the quality of life and general well being of people, practically the world over. While sustainability and ecological balancing were at one time the domain of non government organizations and activist groups, progressive governments are now sitting up to the prospect of ‘ecotaxes’ to reduce the carbon footprint of their populace. The concept works on a simple incentive-based theory – the lesser your footprint, the lower your taxes, and vice versa.
This means that taxes are levied on the use of fossil fuels and greenhouse gases produced, waste disposable taxes, duties on goods imported with a notable energy input, and taxes on hazardous waste, pollution and effluents. On the other hand, to encourage eco-friendliness, corporations could find that a ‘green tax shift’ will result in the lowering in other taxes. Property taxes, payroll and income taxes, even sales taxes could be eliminated, or at least lowered, in what appears to be a win-win situation for all.
On a household or individual level, proposals for a “green mortgage” mean that people who use public transport instead of owning cars, or people with energy efficient vehicles pay less every month than those who own inefficient vehicles. The green mortgage inadvertently charges lower income groups less, as they are less likely to own cars. Moreover, studies in Switzerland have shown that if revenue from green taxes was distributed equally among all households as a bonus, it would benefit the lower income groups the most. This is an indication of progressive taxation policy.
The green tax shift is designed to be revenue-neutral for the government. It implements “full cost accounting” and internalizes market distorting externalities through fiscal policy. People are made to pay for the damage they are causing to the environment instead of transferring the costs onto a third party.
In the United States, the Energy Tax Act was passed by Congress as part of the National Energy Act, with the objective of shifting from oil and gas supply towards renewable sources of energy. The Act introduced a system of tax credits to residents who used solar, wind or geothermal energy. The credit compensated 30% of the cost of equipment up to $2000, and 20% of costs over $2000. A similar credit system applied to businesses that used renewable sources of energy. Another outcome of the act was the “Gas Guzzler Tax” which taxed vehicles with mileage lower than certain stated levels.
In a second step from the green tax shift, the United States government is earmarking expenditure towards sustainability. In 2009, the American Recovery and Reinvestment Act calls for a “Stimulus Package” that provides $ 80 billion for renewable energy, energy efficiency, mass transit, and research.
By creating more ‘green jobs,’ in ‘green businesses’ in the process of reviving their economy, the policy will offset the possible economic failings of a tax shift.
Over in Germany, ecotaxes increased the already existing tax on petroleum in 2002. Before this, in 1998, they introduced a tax on electricity, except for electricity produced by renewable sources. In other parts of Europe, such as Portugal, Spain, Finland and the UK, governments are encouraging citizens to buy energy efficient cars by introducing differentiation in car registration taxes. In Netherlands, a discount of € 6000 is available to on a purchase of a hybrid vehicle.
On a more global scale, the World Commission on Global Governance claims that it is time for “charges on the use of common global resources to finance common global purposes.” International green taxes could also be a source of revenue for the United Nations Organization, and countries will need to reconsider superficial damage control solutions and replace them with long term sustainable measures.
Comments
Got something to say?
Sign up to receive the latest breaking news!
