Abstract
The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Summary of WP/92/104
“International Environmental Taxation in the Absence of Sovereignty” by Bernard P. Kerber
International environmental taxation is an elusive topic owing to the absence of sovereign international governments with the authority to impose taxes. Nonetheless, considerable potential exists for using traditional tax and other fiscal instruments to resolve important transnational and global environmental problems. The paper examines the economic nature of international environmental externalities and their close relationship to the so-called global commons and discusses the conflicting industrial and developing nation property rights and interests that often accompany such issues. Whereas, within a nation, sovereign political authority exists for imposing taxes and other fiscal instruments to help internalize environmental externalities, no such correspondence exists in the case of international environmental externalities whose scope exceeds the sovereign authority to internalize them. Rather than a reassignment of sovereignty, which would create a corresponding sovereign supranational government, international environmental agreements or treaties are seen as the best available means for overcoming this noncorrespondence.
The paper extends the theoretical concepts and policy instruments of traditional public finance to the world of delegated authority and treaties, describing alternative international environmental tax and fiscal instruments that may be used to overcome international environmental externality and global commons problems. It also describes environmental tax and fiscal instruments found under existing international environmental agreements. Finally, it examines a possible agenda for more efficient and equitable international environmental regimes, including earmarked excise taxes, trust funds, and financial transfers, first, in relation to current proposals for an international carbon tax to abate global warming, and, second, in relation to the entire global commons, including the atmosphere, oceans, and space resources, and the preservation of biological diversity.
The paper concludes that contemporary international political attitudes and institutional constraints are likely to prevent the early introduction of sophisticated international environmental tax and fiscal instruments. However, it suggests that an evolutionary or gradual approach may be feasible, building upon such existing international institutions as the Global Environment Facility. Meanwhile, long-run parameter changes may eventually allow the widespread use of sophisticated forms of international environmental taxation.