Working Paper: 409

Environmental Fiscal Instruments: A Few International Experiences

Rajat Verma
K Gayithri

 

Abstract

This paper attempts to document the status of Environmental Fiscal Instruments (EFIs) to explore the relative international experiences of eco taxes in the context of India and examine India’s specificities in these taxes in a wider perspective of other fiscal measures. Environmental levies across 15countries were reviewed and categorised into Annex-II and Non-Annex-I groups. Further, revenues from these levies in the 15 countries were also analysed. The most common form of taxes in the Annex II countries is energy tax which is followed by transport taxes. For India, energy and transport taxes could prove to be vital types of eco tax for addressing issues of climate change. Pollution taxes would be difficult to levy due to administrative difficulties but resource taxes would be imperative because of severe environmental problems associated with mining and related activities. Revenue generated from the levy of environmental taxes/charges for all the Annex II countries hovered between 2 to 4% of their respective GDP except for Canada and US. On the other hand, for Non-Annex I nations this lay only between 0 to 1%.

 

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