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 > [log in to unmask] > For reprint permission contact [log in to unmask]