The Hindu Business Line : Echoes of eco tax

Green taxes are fiscal measures aimed at promoting environmental sustainability, by disincentivising eco-unfriendly activities. There is growing evidence that green taxes actually work, and that they make economic sense, says Vijay V. Vaitheeswaran in Power to the People ( www.vivagroupindia.com ), quoting a finding of the Organisation for Economic Cooperation and Development (OECD), ‘a quasi-governmental think tank for the world’s rich countries’.

He cites, as example, Sweden which introduced in 1991 a tax on fuels based on their sulphur content. “This led to a drop in sulphur content 50 per cent beyond legal requirements, and it stimulated power plants to invest in new abatement technology.”

Other such successful levies have been: Norway’s carbon tax that resulted in lowering emissions from power plants, by over a fifth; Denmark’s tax on non-hazardous wastes which led to ‘sharp declines in waste from households and from construction’; and the phasing out of leaded fuel by European countries through ‘a lead-content tax’.

However, the main problem with green taxes, according to the author, is that they are too often blunted by blanket exemptions granted for heavy industry on such bogus pretences as preserving national competitiveness.

“Subsidies — lavished on everything from agricultural fertilisers to under-priced water to cheap electricity — are probably the single biggest distortion of the markets of the developed world,” he rues.

Can green taxes promote the use of alternative sources of power that are free from carbon emissions? Will nuclear power, for instance, get a fillip from a carbon tax? No clear answers, frets Vaitheeswaran, in a chapter titled ‘A renaissance for nuclear power?’

“The IEA (International Energy Agency) thinks that even the highest of those taxes would boost the competitiveness Of nuclear electricity versus coal (which is carbon-intensive) by just two cents per kW-hour, and versus natural gas by just one cent per kW-hour.”

What about ‘green’ in the auto sector? A popular idea, as you can see from a simple Google search. ‘Tata Motors eyes green car plant in Thailand,’ says Reuters. ‘Top 10 Green Wheels to watch in 2008,’ lists Naturalchoices.co.uk. ‘Chevy unveils green machine to pace 2008 Indy 500,’ reports National Post, Canada. ‘Green car sales need breathing space,’ argues Jakarta Post, Indonesia.

“Tax remains a four-letter word in the US, but Arizona legislature recently offered a tax credit to citizens who bought a ‘dual fuel’ car capable of using either gasoline or natural gas, which burns cleaner,” the book’s epilogue notes. “The offer proved so wildly popular that it cost the state some $500 million, not the $5 million budgeted, before officials could shut it down.”

Even car-loving Americans are willing to embrace greener technology if government sends the proper price signal, reasons Vaitheeswaran. “And the best way to do that is through taxation that reflects all the costs — in terms of national security, as well as those costs to the environment and to human health — of burning oil.”

Green is also very much in the ‘air’. A posting dated January 3, in www.travelweekly.co.uk , is about proposals for environmental tax on aircraft to replace ‘air passenger duty’. The tax should relate to emissions, taking account of the type and age of aircraft and length of flights, and apply to cargo flights and business jets, explains the story. “Details of the tax are due by October, although the change would not come into force until November 2009…”

A book for those who would like to stay on the right side of ‘green’.

http://BookPeek.blogspot.com

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