“Green Taxes” a “win-win option”

The European Commission has begun a debate on ‘Green Taxes' by assuring that such ‘welfare-positive taxes' can only be a ‘win-win option.' On 28 March 2007, the Commission approved a Green Paper on market-based instruments for environment-related policy purposes. The Commission believes that there should be an increased use of market-based instruments such as trading schemes, taxation measures and subsidies as a cost-effective way of achieving environmental and other policy objectives – not only at Community level but also at national levels.

Its aim is to launch a public debate on advancing the use of economic market-based instruments in the Community. Furthermore, the Green Paper identifies a range of areas where market based instruments can be applied. The Commission has stated “ an environmental tax reform (ETR) shifting the tax burden from welfare-negative taxes, (e.g. on labour), to welfare-positive taxes, (e.g. on environmentally damaging activities, such as resource use or pollution) can be a win-win option to address both environmental and employment issues. At the same time, a long term tax shift will require relatively stable revenues from the environment related tax base .” This is among the key options identified in the Green Paper.

The European Commission will decide on the appropriate follow-up in light of the responses received. Furthermore, the Commission wants to take the reactions on the Green Paper for the future review of the Energy Taxation Directive. Replies to the consultation will be sent by the end of July.