Blueprint for a Better Planet
(Page 6 of 10)
Among the activities taxed in Europe are carbon emissions,
heavy metals emissions and the generation of garbage. Tax
shifting does not change the level of taxes, only their
composition. One of the better-known changes was a
four-year plan adopted in 1999 in Germany to shift taxes
from labor to energy. By 2001, this initiative had lowered
fuel use by 5 percent. A tax on carbon emissions adopted in
1990 in Finland lowered emissions 7 percent by 1998 in that
country.
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Environmental tax reform is spreading outside Europe as
well. The United States, for example, imposed a stiff tax
on chlorofluorocarbons (CFCs) to phase them out in
accordance with the Montreal Protocol of 1987. At the local
level, the city of Victoria, British Columbia, adopted a
trash tax of $1.20 per bag of garbage, reducing its daily
trash flow by 18 percent within one year.
One of the newer taxes gaining popularity is called a
congestion tax. Two decades ago, Singapore was the first
city to adopt such a tax. Although it was quite successful,
only recently have other cities, such as Oslo, Norway, and
Melbourne, Australia, done so. City governments tax
vehicles entering the city, or at least the inner part of
the city, where traffic congestion is most serious. In
early 2003, London became the largest city to adopt a
congestion tax; the average speed of an automobile was 9
mph—about the same as a horse-drawn carriage. An $8
charge on all motorists driving into the city center
between 7 a.m. and 6:30 p.m. immediately reduced the number
of vehicles by 24 percent, permitting traffic to flow more
freely while cutting pollution and noise.
For some products where the external costs are large and
obvious, pressure is mounting to impose taxes. By far the
most dramatic example is the agreement negotiated between
the tobacco industry and state governments in the United
States. After numerous state governments launched
litigation to force tobacco companies to reimburse them for
the Medicare costs associated with treating smoking-related
illnesses, the industry decided to negotiate a package
reimbursement, agreeing in November 1998 to reimburse the
50 state governments $251 billion—nearly $1,000 for
every person in the United States. This landmark agreement
was, in effect, a retroactive tax on cigarettes smoked in
the past, one designed to incorporate some of the indirect
costs.
Environmental tax shifting also usually brings a double
dividend. In reducing taxes on income—in effect,
taxes on labor—labor becomes less costly, creating
additional jobs while protecting the environment. This was
the principal motivation in the German four-year shift from
income to energy taxes. T he shift from fossil fuels to
more energy-efficient technologies and to renewable energy
sources reduces carbon emissions and represents a
transition to more labor-intensive industries. Similarly,
by lowering the air pollution from smokestacks and
tailpipes, carbon taxes also reduce respiratory illnesses
such as asthma and emphysema, and health care costs—a
triple dividend.
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