Environmental tax and regional government consumption
Federal, state, and local governments offer numerous tax incentives to promote the cleanup of environmentally contaminated properties.
This item provides a high-level overview of the most common incentives that are offered and a brief update of the federal rules regarding the expensing of environmental remediation costs. However, these rules recently expired and do not apply to costs incurred after December 31, As a result, unless Congress extends the expiration date or makes Sec.
With the expensing option no longer available for costs paid or incurred after December 31,taxpayers will now have to more closely analyze their environmental remediation costs to determine whether there are still some costs that can be expensed under Sec.
Also, even if these expenditures are allowed to be currently expensed under Sec. A number of federal cases and rulings have shed some light on whether environmental remediation costs are currently deductible or have to be capitalized.
In the absence of Sec. See Rev. Prospects for extension: Although several bills were introduced in that would make the Sec. Many states provide tax and nontax incentives to encourage brownfield and environmental cleanup. The most common types of tax incentives include:. Almost all states that have a tax based on income Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not have a tax based on income use federal taxable income as the starting point for determining state taxable income.
The two exceptions are Arkansas and Minnesota, which use their own set of rules. However, even these two states make reference to federal taxable income in their determination of state taxable income. The states will then make modifications to federal taxable income to arrive at state taxable income before apportionment. California and New Hampshire are two states that modify federal taxable income with respect to Sec.
California allows expensing similar to Sec. Other states that conform to the Code as of a date before the extension of Sec. Practice tip: Taxpayers need to determine how their states treat environmental remediation costs.The government is preparing to announce measures in the Budget aimed at tackling the problem of plastic pollution.
These explore what environmental taxes there already are, who they are paid by and provide examples of how changes to environmental taxation can influence behaviour. Environmental taxes are those whose base is a physical unit, for example, a litre of petrol or a passenger flight, that has a proven negative impact on the environment.
These taxes are designed to promote environmentally positive behaviour, reduce damaging effects on the environment and generate revenue that can potentially be used to promote further environmental protection.
Revenue from such taxes has remained relatively stable over the last 20 years at between 2. Environmental taxes can be split into four categories: energy; transport; pollution and resource. These categories of environmental tax might in future include any new taxes on plastics.
These include taxes on the production and use of energy products like petrol, diesel, gas and electricity. By far the largest single contributor to revenue from environmental taxes is hydrocarbon oil duty, also known as fuel duty. This tax covers petrol and diesel fuels despite being classified as an energy tax. Download this chart Image. These industries are likely to have high energy usage and transport fuel needs.
Figure 2: Environmental tax revenue by industry sector; including households, UK Source: Office for National Statistics Notes: For a full list of industry sectors and further information, see the Environmental taxes dataset accompanying this article.
Environmental tax revenue by industry sector is currently only available to These changes can be influenced by taxes, for example, a reduced Vehicle Registration Tax for all cars with low carbon dioxide CO2 emissions and a tax cut on diesel fuel duty inencouraged motorists to trade in their petrol cars for diesel vehicles, which tend to produce less CO2. Fuel duty rates were recently pledged by the UK Prime Minister to be frozen for the ninth year in a row.
The government is currently considering response to its consultation on the draft clean air strategywhich examines how air pollution by not just CO2 but other air pollutants such as nitrogen oxides and particulate matter can be reduced.
Environmental tax statistics
Future changes to environmental taxes might start to discourage the use of both petrol and diesel cars and encourage the use of alternatives, such as electric. There are now approximatelyhybrid electric or electric cars registered in Great Britain incompared with close to zero in Figure 3: Vehicle registrations by selected propulsion type, to Great Britain Source: Department for Transport Notes: Other propulsion type includes: gas, gas bi-fuel, petrol gas, gas diesel, new fuel technologies, fuel cells and steam.
The amount of biodegradable municipal waste sent to landfill in the UK has decreased from There are likely to be multiple contributors to this trend such as the ease of exporting, recycling or incinerating waste, but the introduction of Landfill Tax in has likely made a significant contribution.As the access to this document is restricted, you may want to search for a different version of it.
Edwin van der Werf, Schneider, Kerstin, Bovenberg, Ruud A. Lans Bovenberg, "undated". Department of Economics. Pearce, David W, Takeda, Shiro, You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fan:efeefe:v:html See general information about how to correct material in RePEc. For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Angelo Ventriglia.
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Please note that corrections may take a couple of weeks to filter through the various RePEc services. Economic literature: papersarticlessoftwarechaptersbooks. FRED data. Environmental tax and regional government consumption expenditure in a fiscal federalism system. Registered: Claudio Socci. The increasing attention to climate changes have led national Governments to design environmental tax policies able to face environmental problems and their associated economic consequences like as a negative change of GDP.
The environmental taxation in particular is considered a powerful instrument of pollution control.We've made some changes to EPA. Policy-makers have two broad types of instruments available for changing consumption and production habits in society. They can use traditional regulatory approaches sometimes referred to as command-and-control approaches that set specific standards across polluters, or they can use economic incentive or market-based policies that rely on market forces to correct for producer and consumer behavior.
Incentives are extensively discussed in several EPA reports:. Two basic types of traditional regulatory approaches exist. The first, a technology or design standard, mandates specific control technologies or production processes that polluters must use to meet an emissions standard.
The second, a performance-based standard, also requires that polluters meet an emissions standard, but allows the polluters to choose any available method to meet that standard. Performance-based standards that are technology-based, for example, do not specify a particular technology, but rather consider what available and affordable technologies can achieve when establishing a limit on emissions.
At times, EPA may completely ban or phase out the use or production of a particular product or pollutant, as it has done with chlorofluorocarbons CFCs and certain pesticides. Regulations can be uniform or can vary according to size of the polluting entity, production processes, or similar factors. Regulations are often tailored in this manner so that similar regulated entities are treated equally. While traditional regulatory and voluntary approaches are valuable policy tools for some types of environmental problems, incentive based policies are becoming increasingly popular as tools for addressing a wide range of environmental issues, from acid rain to climate change.
Market-based approaches or incentives provide continuous inducements, monetary and near-monetary, to encourage polluting entities to reduce releases of harmful pollutants. As a result, market-based approaches create an incentive for the private sector to incorporate pollution abatement into production or consumption decisions and to innovate in such a way as to continually search for the least costly method of abatement. A criticism of command-and-control policies is that firms are only encouraged to reduce to a regulated level.
With market incentives, firms will reduce their emissions as long as it is financially valuable for them to do so, and this generally happens at a point where marginal abatement costs are equated across all regulated firms.
Cost savings to firms also often translate into cost savings to customers who purchase products from regulated firms, resulting in lower overall social costs. The main disadvantage associated with economic incentives is that they can be inappropriate for dealing with environmental issues that pose equity concerns. Emissions trading programs, for example, could have the unintended consequence of concentrating pollution in economically-disadvantaged areas pollution hot-spots.
Example market-based approaches include:. In addition to the instruments listed above, hybrid approaches — those that combine aspects of command-and-control and market-based incentive policies — are often discussed in the literature and increasingly used in practice. These approaches are appealing to policymakers because they often combine the certainty associated with a given emissions standard with the flexibility of allowing firms to pursue the least costly abatement method.
However, hybrid approaches are not always the most economically efficient approach because either the level of abatement or the cost of the policy is greater than what would be achieved through the use of a market-based incentive approach. Examples of hybrid approaches include:. EPA has also pursued a number of non-regulatory approaches that rely on voluntary initiatives to achieve improvements in emissions controls and management of environmental hazards.
These programs are usually not intended as substitutes for formal regulation but instead act as important complements to existing regulation. Others have been developed to improve environmental quality in areas that policymakers expect may be regulated in the future but are currently not regulated, such as greenhouse gas emissions and non-point source water pollution.
An example is the U. Acid Rain Program, a cap-and-trade system that cost-effectively reduced sulfur dioxide emissions from electric utilities. Other examples include voluntary carbon trading schemes, such as the Chicago Climate Exchange; and nutrients trading programs between water polluting firms and agricultural producers that aim to reduce excessive loading of fertilizer and pesticides into water bodies.
Fees, charges, and taxes are widely used incentives which generally place a per unit monetary charge or fee or tax on pollution emissions or waste to reduce the overall quantity. The main drawback is that fees, charges and taxes cannot guarantee a specific amount of pollution reduction, only that those who pollute will be penalized.
Examples include pollution taxes, water user fees, wastewater discharge fees, and solid waste disposal fees. Subsidies are forms of financial government support for activities believed to be environmentally friendly. Rather than charging a polluter for emissions, a subsidy rewards a polluter for reducing emissions. Examples of subsidies include grants, low-interest loans, favorable tax treatment, and procurement mandates. Subsidies have been used for a wide variety of purposes, including: brownfield development after a hazardous substance contamination; agricultural grants for erosion control; low-interest loans for small farmers; grants for land conservation; and loans and grants for recycling industrial, commercial and residential products.Global energy consumption rose strongly inand so did energy-related CO2 emissions, which reached a new all-time high.
This is disconcerting, as meeting the goals of the Paris Agreement will require deep cuts in emissions. Taxing Energy Use presents a snapshot of where countries stand in deploying energy and carbon taxes, tracks progress made, and makes actionable recommendations on how governments could do better. Tax rates and tax coverage are detailed by country, sector, energy source and tax type. The use of a common methodology ensures full comparability of tax rates and structures across countries. Summary indicators facilitate cross-country comparisons.
The Taxing Energy Use brochure highlights key facts and figures that are featured in the publication, due to be released mid-October Taxing polluting sources of energy is an effective way to curb emissions that harm the planet and human health. Where do countries stand in deploying energy and carbon taxes to reach environmental and climate goals? How can governments step up efforts? Country specific notes and energy tax profiles.
Tax rates and tax base coverage are detailed by country, sector, energy source and tax type. Well-designed energy tax systems encourage citizens and investors to favour clean over polluting energy sources. Reforming energy tax systems is a key component in the fight against climate change and delivers co-benefits in the form of reduced health damages from local air pollution. The series enables policy makers and the general public to keep track of progress made and identify opportunities for improving energy and carbon price signals.
Click to enlarge View longer version. Taxing Energy Use Using Taxes for Climate Action Well-designed systems of energy taxation encourage citizens and investors to favour clean over polluting energy sources. In particular, fuel excise and carbon taxes are simple and cost-effective tools to curb dangerous climate change. Energy and carbon taxes also contribute to limiting health damage from local pollution.
Taxing Energy Use TEU presents a snapshot of where countries stand in deploying energy and carbon taxes, tracks progress made, and makes actionable recommendations on how governments could do better.
The report contains new and original data on energy and carbon taxes in OECD and G20 countries, and in international aviation and maritime transport.The increasing attention to climate changes have led national Governments to design environmental tax policies able to face environmental problems and their associated economic consequences like as a negative change of GDP.
The environmental taxation in particular is considered a powerful instrument of pollution control. More important, it provides public revenue that can be recycled at local level in order to attain the regional double dividend in a fiscal federalism framework. In this respect, we use a Computable General Equilibrium CGE model with imperfect labour market, to assess the regional effects of an environmental fiscal reform designed with the aim of reducing the CO2 emissions in a fiscal federalism setting.
In particular, we introduce a local green tax on commodities output with a progressive structure. The tax burden depends on the commodity polluting power. According to fiscal federalism principles the tax revenue is collected by the local Government and it is entirely recycled to finance the local consumption expenditure. The application is done on a bi- regional Social Accounting Matrix for Italy and the results highlights the distributional effects of the reform on macroeconomic variables into the bi-regional income circular flow.
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Five facts about environmental taxes
Suggested articles.People often think of taxation and the environment as two entirely different worlds—two circles that do not intersect. Governments impose taxes to raise the revenues they need to operate; governments get involved in environmental matters to protect the public interest. However, the two circles do intersect. Governments can—and do—use tax policies to achieve environmental goals. Environmental taxes come in many different forms, but as a general matter environmental tax measures either impose a tax cost on some product or activity that is environmentally damaging, or they give a tax benefit to some product or activity that is environmentally beneficial.
For example, the federal government imposes a significant excise tax on ozone-depleting chemicals, and it offers a tax credit to people who buy electric vehicles. In both instances, the tax code has altered the "price" of the commodity, injecting an important signal into the economic calculations that affect behavior. All types of tax systems—income tax, estate tax, property tax, and excise tax—potentially can incorporate environmental tax measures, and all levels of government—local, state, and federal—can consider environmental taxes.
Environmental taxes will not necessarily replace traditional environmental regulation. In some instances, they may complement regulation, and in others they may provide an option when regulation is not appropriate. On a project-by-project basis, Vermont Law School's Environmental Tax Policy Institute will conduct research on a wide range of environmental tax issues. Potential projects could include:. The projects may result in publications, white papers, and conferences or workshops. Anyone interested in exploring the potential for a project is invited to contact the Institute.
Professor Janet E. Vermont Law School will continue with virtual classes during the fall semester. The physical campus will reopen as soon as it is safe to do so. VLS community members should check their email for more information. Please visit vermontlaw. What Is Environmental Taxation? Potential projects could include: the application of environmental taxation to specific environmental issues, such as energy consumption, toxic waste, sprawl, water and air quality, and habitat protection; issues involved in the design of sound environmental taxes; constitutional questions raised by the use of environmental taxes; assessments of the extent to which governments in the United States and around the world are using environmental taxes; and the role of environmental taxation compared with other approaches to environmental problems.