Sorry, Joe, when I replied to your LF contribution, I hadn't entered the
EN folder and had not realised you had posted to both places!

Best regards,

Brian

Joe Fjelstad wrote:
>
> The following is forwarded without comment for the information of
> those in this forum
>
> Eco-Economy Update 2002-10
> For Immediate Release
> Copyright Earth Policy Institute 2002
> July 25, 2002
>
> http://www.earth-policy.org/Updates/Update14.htm
>
> Bernie Fischlowitz-Roberts
>
> Many countries have implemented taxes on environmentally destructive
> products and activities while simultaneously reducing taxes on income.
> The
> scale of tax shifting has been relatively small thus far, accounting
> for
> only 3 percent of tax revenues worldwide. It is increasingly clear,
> however,
> that countries are recognizing the power of tax restructuring to
> reach environmental goals.
>
> The market price for a gallon of gasoline, for example, reflects the
> cost of
> drilling, extracting, refining and transporting the oil. The market
> price
> does not account for the air pollution and acid rain produced by
> burning
> gasoline, nor its contribution to climate change as evidenced by
> rising
> temperatures, rising sea levels, and more destructive storms. Raising
> taxes
> on environmentally destructive products and activities is designed to
> more
> closely align the market prices with their actual costs.
>
> Germany, a leader in tax shifting, has implemented environmental tax
> reform
> in several stages by lowering income taxes and raising energy taxes.
> In
> 1999, the country increased taxes on gasoline, heating oils, and
> natural
> gas, and adopted a new tax on electricity. This revenue was used to
> decrease
> employer and employee contributions to the pension fund. Energy tax
> rises for many energy-intensive industries were substantially lower,
> however, reflecting concerns about international competitiveness.
>
> In 2000, Germany further reduced payroll taxes and increased those on
> motor
> fuels and electricity. As a result, motor fuel sales were 5 percent
> lower in
> the first half of 2001 than in the same period in 1999. Meanwhile,
> carpool
> agencies reported growth of 25 percent in the first half of 2000. Thus
> far,
> Germany has shifted 2 percent of its tax burden from incomes to
> environmentally destructive activities.
>
> One part of the United Kingdom's environmental tax reform involved a
> steadily increasing fuel tax known as a fuel duty escalator, which was
> in
> effect from 1993 until 1999. As a result, fuel consumption in the road
>
> transport sector dropped, and the average fuel efficiency of trucks
> over 33
> tons increased by 13 percent between 1993 and 1998. Ultra-low sulfur
> diesel
> had a lower tax rate than regular diesel, which caused its share of
> domestic
> diesel sales to jump from 5 percent in July 1998 to 43 percent in
> February
> 1999; by the end of 1999, the nation had completely converted to
> ultra-low
> sulfur diesel.
>
> The Netherlands has also shifted taxes to environmentally destructive
> activities. A general fuel tax, originally implemented in 1988 and
> modified
> in 1992, is now levied on fossil fuels; rates are based on both the
> carbon
> and the energy contents of the fuel. Between 1996 and 1998, a
> Regulatory
> Energy Tax (RET) was implemented, which taxed natural gas,
> electricity, fuel oil, and heating oil. Unlike the fuel tax, which was
>
> designed principally for revenue generation, the RET's goal was to
> change
> consumer behavior by creating incentives for energy efficiency. To
> maintain
> competitiveness, major energy users were exempted from the taxes, so
> this
> tax fell mainly on individuals.
>
> Since sixty percent of the revenue from these Dutch taxes came from
> households, the taxes were offset by decreasing income taxes. The 40
> percent
> of revenue derived from businesses was recycled through three
> mechanisms: a
> reduction in employer contributions to social security, a reduction in
>
> corporate income taxes, and an increased tax exemption for self-
> employed people. This tax shift has caused household energy costs to
> increase, which has resulted in a 15-percent reduction in consumer
> electricity use and a 5- to 10-percent decrease in fuel usage. (See
> http://www.earth-policy.org/Updates/Update14.htm )
>
> Finland implemented a carbon dioxide (CO2) tax in 1990. By 1998, the
> country's CO2 emissions had dropped by almost 7 percent. Finland's
> environmental taxes, like those in most countries, are far from
> uniform: the
> electricity tax is greater for households and the service sector than
> for
> industry.
>
> Sweden's experiment with tax shifting began in 1991, when it raised
> taxes on
> carbon and sulfur emissions and reduced income taxes. Manufacturing
> industries received exemptions and rebates from many of the
> environmental
> taxes, putting their tax rates at half of those paid by households. In
> 2001,
> the government increased taxes on diesel fuel, heating oil, and
> electricity while lowering income taxes and social security
> contributions.
> Six percent of all government revenue in Sweden has now been shifted.
> This
> has helped Sweden reduce greenhouse gas emissions more quickly than
> anticipated. A political agreement between the government and the
> opposition
> required a 4-percent reduction below 1990 levels by 2012. Yet
> by 2000, emissions were already down 3.9 percent from 1990—in large
> measure
> due to energy taxes.
>
> The myriad exemptions given to energy-intensive industries in existing
> tax
> shift programs, created out of legitimate competitiveness concerns,
> slow the
> creation of more effective tax systems. Using border tax
> adjustments—where
> companies have environmental taxes rebated to them upon export and
> have
> domestic environmental taxes added to imports—
> can ensure international competitiveness without tax exemptions.
>
> Eliminating subsidies to environmentally destructive industries will
> also
> help the market send the right signals. Worldwide, environmentally
> destructive subsidies exceed $500 billion annually. As long as
> government
> subsidies encourage activities that the taxes seek to discourage, the
> effectiveness of tax shifting will be limited.
>
> If properly constructed, tax shifts can help make markets work more
> effectively by incorporating more of the indirect costs of goods and
> services into their prices and by changing consumer and producer
> behavior
> accordingly. The emergence of a world-leading wind turbine industry in
>
> Denmark, for example, is one result of Danish taxes on fossil fuels
> and
> electricity,
> which are among the highest in the world. These measures have also
> spurred
> sales of energy-efficient appliances and encouraged other
> energy-saving
> behavior.
>
> Expanding the tax base to encompass more products and services with
> deleterious environmental impacts would greatly enhance the
> effectiveness of
> tax shifting. Aviation fuel, for example, is currently tax-free
> worldwide,
> despite airplane emissions causing 3.5 percent of global warming.
> However,
> recent European discussions of imposing taxes on jet fuel are a
> promising development. Such taxes might slow the projected growth in
> worldwide air travel and encourage manufacturers to make efficiency
> improvements that lower jet fuel consumption.
>
> The goal of tax restructuring is to get the market to tell the
> ecological
> truth. Thus far, tax shifts have been limited in scope and have
> produced
> positive, if modest, results. Creation of an eco-economy calls for tax
>
> shifts on a broader scale, and of much larger magnitude, in order for
> prices
> to incorporate environmental costs and to produce the requisite
> changes in
> individual
> and collective behavior.
>
> Additional data and information sources at www.earth-policy.org or
> contact
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