Environmental taxes: a key driver to tackle climate change

Environmental taxes: a key driver to tackle climate change

Green Budget Europe was well-represented at the Global Conference on Environmental Taxation (GCET) hosted by the Faculty of Law, CEU San Pablo University, Madrid, from 26-28 September. The topic of the event was Environmental Tax Challenges in the 21st Century: Urban Concentration and Increasing Transport.

One of the most important outcomes of the conference was the new Spanish government’s clear expression of its ambition and political will to promote environmental taxes and other fiscal measures in Spain, as well as the government’s high level participation in the event. Given Green Budget Europe’s awareness-raising and political lobbying in collaboration with Climate Strategy & Partners in 2015 in favour of environmental fiscal reform in the country, this heightened interest was very welcome and could, in some respect, be partially a result of GBE’s efforts.

To support these developments and drive the transition, the Spanish government has created a new Ministry for Ecological Transition. GBE President Aldo Ravazzi and GBE Director Eero Yrjö-Koskinen held a separate meeting with its Director General Javier Cachón de Mesa to discuss potential collaboration to enhance circular economy objectives in Spain.

At the GCET conference, the government’s contribution included the first keynote speech, given by Ms Valvanera Ulargui, Director General of the Spanish Climate Change Office. She introduced her government’s intentions to tackle climate change and pass a national climate and energy transition law to become the main regulatory tool in Spain to drive greenhouse gas emissions reductions and enable the country to adapt to climate change impacts.

Director General Ms Pilar Jurado, Department of Customs and Special Taxes at the State Agency for Tax Administration, Spain, made a keynote speech on environmental taxes and green fiscal policies already implemented in Spain, as well as discussing possible new taxes for the future.

Finally, Jesús Gascón Catalán, Director of the Spanish Tax Agency, gave the first presentation at the Green Fiscal Policy Network’s side-event Delivering the Paris Agreement: The role of Green Fiscal Reforms in the Transport Sector by acknowledging the potentially important role of environmental taxes in Spain.

All three representatives of the Spanish administration expressed concerns regarding the possible regressive impacts of taxes and the administrative challenges associated with addressing them. Taxes and social compensation payments are often not administrated at national level, and there is a danger of double taxation if environmental taxes overlap on national and federal level.

Possible regressive impacts of green taxes were discussed at the GFPN side event. However, as GBE Vice-President Jacqueline Cottrell pointed out, no assumptions should be made without in-depth policy impact assessment. Impacts vary within and between income quintiles and according to country context, the ability for poorer households to substitute, and their consumption patterns. At the same time, the equity impacts of the status quo on poorer households, the consequences of inaction on climate change and the welfare gains associated with environmental improvement should not be forgotten.

Other panellists at the GFPN side event included Rob de Jong, who shared insights from the work of the Global Fuel Economy Initiative and highlighted positive cases of greening vehicle taxes to drive transition to hybrid vehicles in the transport sector in Sri Lanka and Mauritius. Ian Parry of the IMF looked at the range of instruments available to policymakers in the transport sector. Kurt van Dender of the OECD contended that a shift in emphasis and priorities is necessary to drive decarbonisation in road transport – to focus more clearly on the desired outcome and explore which packages of instruments can help us to achieve this outcome. Kurt also broadened the discussion to talk about the broader fiscal system, such as corporate income tax rules, homeownership, parking charges in cities and commuter subsidies.

Interesting news for GBE also came from Mr Vicente Hurtado, Head of the Energy Taxation and other Indirect Taxes Unit at the European Commission, who told the conference that the Commission had recently engaged in a new evaluation of the Energy Tax Directive, to be finalised by the end of 2018. The rationale for the evaluation is to explore whether it is fit for purpose given recent commitments under the Paris Climate Agreement and the 2030 Climate and Energy EU framework.

Parallel sessions at the conference covered a wide range of environmental taxes in the transport sector, from road pricing and congestion charging, vehicle and fuel taxation and parking fees through to non-road sectors of maritime transport and aviation.

The final keynote was given by Professor Janet Milne, who examined the impact of the digital economy on the environment and on the transport sector. Professor Milne asked whether and how environmental taxation should respond to the consequences of technological innovation in the 21st century. A very pertinent example she referred to was increased consumption as a result of online shopping, and its impact on congestion, air quality, fuel consumption and use of non-recyclable and packaging sectors. How to address the environmental externalities of the digital industries was also a topic picked up on in several different contexts during the conference. Governments should not be too slow to respond to these new challenges.

Finally, GBE board member Professor Theodoros Zachariadis informed that the next GCET meeting will take place on 25-27 September 2019 in Limassol, Cyprus, and will focus on the topic of Economic Policies for Low-Carbon Development. Mr Zachariadis himself will be the GCET conference chair.

Photo: The GBE board and advisory committee were well represented at the GCET conference in Madrid. Board members included (from left to right) Theodoros Zachariadis, Magnus Nilsson, Ignasi Puig-Ventosa, Jacqueline Cottrell and Aldo Ravazzi-Douvan. Mikael Skou Andersen (on the right) is a member of the GBE advisory committee.

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