EU28 countries could raise an estimated €208 billion per annum in additional revenue in 2030, equivalent to a 1.05% increase in GDP, by implementing environmental tax reforms.
That is one of the key findings from a new report for the European Commission’s DG Environment. The study examined the potential economic and environmental benefits of environmental tax reform, resulting from both the implementation of new environmental taxes and increases to existing tax rates, in all 28 EU Member States. In addition, the study found that the environmental benefits associated with these changes are valued at €13.7 billion per annum in 2030.
Environmental taxes are an important source of tax income, and provide an economic incentive to householders and businesses to reduce their impact on the environment. Like taxes on consumption and recurrent property taxes, environmental taxes – which target energy, transport, pollution and resources – are considered less detrimental to growth than those on labour or corporate income.
As a result, they are increasingly promoted in the context of economic recovery and growth-friendly fiscal consolidation. The revenue raised from environmental taxes can be used to offset revenues from these other taxes, part of what is known as a ‘tax-shift’.
The study was conducted as part of the European Semester process by a consortium led by Eunomia, which included the Institute for European Environmental Policy, Aarhus University, ENT Environment and Management, and Denkstatt. It is intended that the report will feed into the Commission’s proposed Country Specific Recommendations for Member States in 2016.
It updates two previous studies, which examined the potential for environmental tax reform in 12 Member States and 14 Member States, and adds an assessment of the political feasibility of undertaking the suggested environmental tax reforms. The study is also in the process of creating a database of environmental taxes.