Design of Environmental Tax Reforms in Europe

Abstract

This chapter provides an overview of carbon‐energy taxation introduced under environmental tax reforms in Europe. First a broad overview of the relative shares of taxes on energy, transport, and pollution is presented. This overview treats developments in EU‐15 as well as in the ten new member states and shows that tax‐reform proposals are considered across Europe as a whole. Developments in tax‐shifting are most advanced in Denmark, Finland, Germany, Netherlands, Slovenia, Sweden, and the UK. Comprehensive reform proposals have also been put forward in countries such as France, Italy, and Belgium, while currently among the new member states Estonia and Czech Republic have announced tax shifts to be implemented. The chapter investigates whether there have been ‘implicit’ tax shifts, i.e. by examining how the ratios of labour taxation‐to‐GDP and of environmental taxes‐to‐GDP have developed during the last decade. Furthermore, the chapter looks into how European countries have designed their tax shifts, and in this connection how the concern of potential losses of competitiveness have been addressed and mitigated. This is done by explaining the different principles and measures applied in the seven countries which have already introduced tax shifts.

A Cluster Design on the Influence of Energy Taxation in Shaping the New EU-28 Economic Paradigm

“…This reform was manifested on two levels: -the unilateral plan that mainly generated negative effects [34]; -the collaboration plan between states.…”

Introducing carbon taxes – issues and barriers

“…22 The tax was levied on all energy products (light fuel oil, heavy fuel oil, coal, natural gas and peat) except transport fuels as these were already subject to energy taxes. 23 It was implemented as an excise duty on energy products. Over time the tax changed.…”

“…Over time it rose to 18 Euros in 2003, and to 20 Euros in 2008. 24 Thus the tax changed frequently and on an ad hoc basis despite the declared intention to have introduced a permanent CO 2 tax system. 25…”

A Major Environmental Tax Reform for the UK: Results for the Economy, Employment and the Environment

“…Revenue recycling will, however, offset the tax-interaction effect to some extent, particularly if it is used to reduce income taxes and employers' social security contributions, because the former reduction will increase the marginal returns to labour and, therefore, the incentive to work, while the latter reduction will mitigate the inflationary effect of the environmental taxation, which is the root cause of the tax interaction effect. The overall outcome is, however, uncertain, and will depend on both the detail of how the revenue recycling is implemented (Speck and Jilkova 2009) and, if the effect is being modelled, the specification of taxation and the labour market in the model. Reviewing this issue, Bosquet (2000) and Patuelli et al (2005) are in general positive that joint environmental and economic benefits can be achieved, whereas Fullerton et al (2008) are more sceptical.…”

“…A number of EU countries, including the UK, have introduced ETRs of varying scopes (Sweden 1990, Denmark 1993, Netherlands 1996, Finland 1997, Germany, UK 2001, which have been reviewed in Speck and Jilkova (2009). These ETRs, as implemented, contrast in several ways with the theoretical concepts discussed above, partly due to transaction and administration costs, but also due to political preferences and constraints.…”