Resource taxes are useful for limiting demand when it is not important to establish a maximum level of aggregate resource use. Such taxes could replace existing taxes; or the money they raise could be returned to the taxpayer for investment in better pollution control equipment and other subsidies.
Resource taxes should be introduced gradually to avoid economic disruption. A pre-announced schedule of increasing the taxes over a period of 10 or more years would give the private sector time to adapt. Matching declines in the rates of other taxes would make resource taxes more acceptable. It is more important that resource taxes are equitable, easy to modify and able to steer the economy in directions that are in society's interest, than that they are based on unattainably exact measures of social cost. The aim is to raise taxes on behaviour we want less of, such as depletion and pollution; and reduce them on what we want more of, such as employment of labour.
'Caring for the Earth' is published by World Wide Fund for Nature and others, and is available by post for L11-95 incl. p&p from Earthscan Publications, 3 Endsleigh Street, London WC1H ODS (tel 071 388 9541).
The following criteria should be observed for all environment taxes:
(1) Taxes should be charged on factors for which there is a broad consensus that they are damaging the environment.
(2) Environmental taxes should be just in terms of distribution. In case of need, social policy compensation should be given.
(3) The administrative cost of collecting environmental taxes should be small.
(4) Environmental taxes should be introduced slowly and in steps to give the economy and technology time to adjust.
(5) Environmental taxes should be introduced throughout the EC, if possible.
Following these criteria, I could imagine the following European taxes within twenty or thirty years (1988 prices):
(1) Energy: ECU 7 per gigajoule of fossil and nuclear energy.
(3) Water: ECU 10 per cubic metre of polluted waste water or ECU 3 per cubic metre of water used.
(4) Waste: ECU 50 per ton of unsorted solid waste, ECU 500 per ton of hazardous waste.
(5) Air: ECU 1,000 per ton of SO2, NOX, CO or hydrocarbons, ECU 100 per ton of methane, ECU 50 per ton of CO2.
Although hotly opposed by industrial lobby groups, the scheme of Carlo Ripa di Meana, the European Community environment commissioner, to levy $10 on a barrel of oil by the year 2000 has been welcomed by environment ministers. The European Commission wants to put $3 on a barrel in 1993, and then add another dollar per year until 2000 - this would raise in the region of L38 billion. It has been calculated that if the full tax were introduced now, it would cost the average UK household about L130 a year.
The tax has credibility because Holland, Germany and Denmark, the more ecologically conscious Northern EC states, are all threatening to impose their own energy taxes. The UK government is cautiously supportive of the general idea, as long as there are to be balancing tax cuts elsewhere, with any revenue staying in national exchequers. However it is concerned about Europe going it alone, leaving American and Japanese industries with cheaper energy (and thus greater use of energy, with no overall global reduction).