Environmental Tax Reform: Principles from Theory and Practice to Date

By Ian W.H. Parry, John Norregaard, Dirk Heine

July 1, 2012

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Ian W.H. Parry, John Norregaard, and Dirk Heine. Environmental Tax Reform: Principles from Theory and Practice to Date, (USA: International Monetary Fund, 2012) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper recommends a system of upstream taxes on fossil fuels, combined with refunds for downstream emissions capture, to reduce carbon and local pollution emissions. Motor fuel taxes should also account for congestion and other externalities associated with vehicle use, at least until mileage-based taxes are widely introduced. An examination of existing energy/environmental tax systems in Germany, Sweden, Turkey, and Vietnam suggests that there is substantial scope for policy reform. This includes harmonizing taxes for pollution content across different fuels and end-users, better aligning tax rates with values for externalities, and scaling back taxes on vehicle ownership and electricity use that are redundant (on environmental grounds) in the presence of more targeted taxes.

Subject: Economic sectors, Environment, Environmental taxes, Expenditure, Fuel tax, Natural gas sector, Public expenditure review, Taxes

Keywords: Carbon tax, Coal tax equivalent, Corrective tax, Country evaluation, Design principles, Direct tax, Emissions tax, Environmental tax, Environmental taxes, Externalities, Factor tax distortion, Fuel economy, Fuel oil, Fuel reduction, Fuel tax, Fuel tax, Fuel taxes, Global, Natural gas sector, Pigouvian tax, Public expenditure review, Tax burden, Tax expenditure, Tax reform, Value-added tax, Vehicle ownership tax, WP

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/180
Stock No:

WPIEA2012180
ISBN:

9781475505283
ISSN:

1018-5941

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