How should green taxation be designed so that it accommodates producer interests? We argue that to design green taxes which are high enough to have the desired incentive effects, tax revenues must be reimbursed, either by earmarking them for environmental subsidies or by reducing other taxes directed at industry. If green tax schemes can be designed this way, industry will have little incentive to mobilise strong opposition to green taxation. However, in practice, the requirement of reimbursement may be difficult to fulfil because, with few exceptions, polluting industries are not homogeneous. This means that reimbursement will redistribute financial resources within industry and thus create winners and losers. Still, green taxes can be used in heterogeneous industries which can be created by operating separate tax schemes for each branch of industry. The Danish case of pesticide taxation demonstrates that in homogeneous sectors relatively high tax levels can be implemented because revenues can be reimbursed without creating redistribution within producer communities.
Green taxation; Policy design; Lobbyism; Reimbursement; Industry
Main Research Area:
The Ecological Modernization of Society. 5th Nordic Environmental Research Conference, Aarhus, Denmark, 2001