This paper provides a framework for examining environment taxes. It reviews the theoretical efficiency of three types of environment taxes: taxes on emissions or Pigouvian taxes; taxes on productive inputs or consumer goods whose use is related to environmental damage; and environment-related provisions in other taxes. A survey of environment taxes in 42 countries--drawn from developing countries, economies in transition, and industrial countries--illustrates that the use of environment taxes differs dramatically from the recommendations of environment tax theory. This divergence between the theory and practice of environment taxes can be attributed to several factors; environment taxes are difficult to implement, there are many factors that impede their effectiveness, and their introduction may be discouraged by their implications for other policy objectives.
This paper reviews the effectiveness of three types of environment taxes--Pigouviantaxes (per unit taxes on emissions); taxes on inputs or consumer goods whose use is related to environmental damage; and environment-related provisions in other taxes--and surveys the use of these taxes in 42 developing countries, economies in transition, and industrial countries.
The paper finds a wide gulf between the theory and practice of environment taxation. The three types of environment taxes are ranked in terms of conventional efficiency criteria: Pigouviantaxes
emissions taxes that set their rates according to the amount of emissions and extent of environmental damage—known as, “Pigouviantaxes”;
indirect taxes on production inputs or consumer goods whose use can damage the environment (for example, excise taxes on gasoline);
environment-related provisions in other taxes; and
accelerated depreciation provisions and lower tax rates for equipment and production methods that save energy and reduce pollution.
The lack of a generally accepted definition has complicated any consistent classification of such
Ronald T. McMorran, David C.L. Nellor, and Ved P. Gandhi
A number of different types of taxes have been used to pursue environmental objectives. Two features of environment-related taxes are often overlooked. First, the efficiency argument in favor of environment taxes is invalidated by the widespread use of taxes that differ from Pigouviantaxes which economic theory suggests are the efficient solution to environmental damage. Second, design and implementation factors that determine the effectiveness of environment taxes vary significantly across countries. Consequently, environment taxes may not