Environmental Tax Reform: Principles from Theory and Practice to Date

Ian Parry, John Norregaard and Dirk Heine

No 2012/180, IMF Working Papers from International Monetary Fund

Abstract: This paper recommends a system of upstream taxes on fossil fuels, combined with refunds for downstream emissions capture, to reduce carbon and local pollution emissions. Motor fuel taxes should also account for congestion and other externalities associated with vehicle use, at least until mileage-based taxes are widely introduced. An examination of existing energy/environmental tax systems in Germany, Sweden, Turkey, and Vietnam suggests that there is substantial scope for policy reform. This includes harmonizing taxes for pollution content across different fuels and end-users, better aligning tax rates with values for externalities, and scaling back taxes on vehicle ownership and electricity use that are redundant (on environmental grounds) in the presence of more targeted taxes.

Keywords: WP; carbon tax; fuel economy; value-added tax; direct tax; fuel oil; tax burden; environmental taxes; design principles; externalities; fuel taxes; country evaluation; fuel tax; tax reform; coal tax equivalent; emissions tax; Pigouvian tax; fuel reduction; tax expenditure; corrective tax; vehicle ownership tax; environmental tax; factor tax distortion; Fuel tax; Natural gas sector; Public expenditure review; Global (search for similar items in EconPapers)
Pages: 39
Date: 2012-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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