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Carbon Taxes Global carbon tax could raise $1 trillion
from ENDS Environmental Daily Monday, May 12, 1997 A global carbon tax could raise sufficient revenue to reduce wage costs by a fifth, US environmental research organisation, the WorldWatch Institute (WWI), concludes in a new report. It calls on governments to grasp the political challenge of shifting taxes from labour to pollution, describing current tax codes as "relics of an era when we could ignore our economic dependence on the environment".
WWI's report comes shortly before the EU's Internal Market Commissioner Mario Monti is due to publish a new code of conduct on tax policies, which is expected to encourage a shift from taxation of labour to use of environmental resources and pollution.
WWI selects examples from across the world, including several from Europe, to support its argument that taxation and other market instruments such as tradeable permit schemes are a cheap and effective way to reduce pollution. In particular, it points to Dutch taxes on heavy metal discharges to water, German taxes on toxic waste production and Danish taxes on CFCs.
But it observes that there has been a slow acceptance of these merits "despite a 75-year pedigree in the economic literature". WWI estimates that 90% of the $7.5 trillion (Ecu6.6 trillion) in tax revenues raised globally each year comes from taxes on wages, personal income, corporate profits, capital gains, retail sales, trade and built property. In comparison, it says a carbon tax on coal, oil and natural gas could alone raise $1 trillion. This would be sufficient to cut taxes on wages by 20%.
However, the report's author, David Malin Roodman, warns against a "puritanical" approach to environmental taxes. He argues that they should be accompanied by safeguards for the poorest members of society. For example, he cites a water tax introduced by one Portuguese town. This measure is "terraced" so that households only begin to be taxed once their water usage exceeds a threshold deemed sufficient to meet basic needs.
Mr Roodman also says that environmental taxes should be applied as part of a broader package of measures. In particular, alternatives to polluting activities should be provided to support changes in industrial and consumer behaviour.
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