The Scope and Limitations of Environmental Taxes Essay Example

The Scope and Limitations of Environmental Taxes Paper Looking specifically at first tier emerging markets, this paper emphasizes the necessity of mitigating the environmental damage that accompanies economic growth and industrialization. Following this, the case of India (as one of the few developing countries that has implemented environmental taxes) is analyses in detail. This paper concludes by looking at the limitations and challenges of the use of environmental taxes in developing countries; as well as possible ways forward. . Development and the Environment In Reconstructing Development Theory: International Inequality, Institutional Reform and Social Emancipation Brett puts forward the idea that the environment has not historically, or sufficiently, been considered in the intent of development because low income countries had not industrialists and therefore produced negligible emissions (Brett, 2008). The environment has however increasingly become a point of contention in recent years as developing countries particularly countries like China and India that have experienced rapid economic growth (and industrialization) industrialist under threat of greater environmental restrictions from the international community. These restrictions were not faced by the currently developed world during their time of development (Brett, 2008). Rising consumerism in evildoing countries, coupled With high levels of population growth has put the environment under further pressure (Buck-Hansen Luridness, 2012). In short, the nature of development has been such that the earths finite resources have not been sufficiently considered, resulting In an environmental crisis. There have however, from a policy perspective, been few concrete laws to mitigate the detrimental impact of industrialization on the environment. Industrial development policies are still largely favored in their trade-off with environmental degradation. Furthermore, politically, a logic that favors the environment over economic growth is a difficult sell to citizens. Organizations such as the World Bank, and many development economists, argue that the use of taxes, subsidies, and appropriate pricing to both encourage more efficient use Of natural resources, and reduce pollution from consumption and production, would go a long way in mitigating further environmental damage (Bruce Ellis, 1993). We will write a custom essay sample on The Scope and Limitations of Environmental Taxes specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on The Scope and Limitations of Environmental Taxes specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on The Scope and Limitations of Environmental Taxes specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Furthermore, the World Bank argues that this will be at minimal cost to economic growth. In line with the view of the World Bank, Brett rightly emphasizes the need to introduce institutions that generate the incentive and accountability mechanisms that encourage producers to shift from high impact to low impact technologies (Brett, 2008). This view advocates a combination of market and state organization. The introduction of environmental taxes would be one such initiative as will be further elaborated upon in the section below. 3. Environmental Taxes Environmental taxes fall within a set of environmental policy tools known as economic- or incentive-based instruments. Economic- or incentive-based instruments attempt to change behavior by changing incentive structures ether than prohibitive legislation that would be costly to implement. Environmental taxes use fees as their incentive instrument (Bloodstone, 2003). Countries typically implement environmental taxes in order to raise revenues for their treasuries; or to internalize negative environmental externalities of economic activities (Bloodstone, 2003). In Environmental Taxes in Developing and Transition Economies, Bloodstone identifies three tiers Of taxes the Poignant Tax (as the First-Best Tax); the Second-Best Tax; and the Third Best Tax these are briefly outlined below (Bloodstone, 2003). The Poignant Tax: The tax is targeted at companies that pollute the environment or create excess negative externalities and are implemented because the market doesnt provide enough incentive to reduce negative externalities. While it is the best case for environmental taxation, the costs of implementing it are high; and the required amount of information too high particularly relating to marginal cost and marginal benefit (Bloodstone, 2003). The Second-Best Tax: When deciding on the level of taxation for the Second-Best Tax, levels are set exogenously typically as a result of political processes which advocate assure and goals such safe minimum standard