Environmental taxes can offer several benefits, for example:
- Build costs into market transactions ensuring both consumers and manufacturers pay the full cost of pollution.
- Persuade producers and consumers to change their behaviour. Tax incentives persuade people to act in a more environmentally friendly manner and tax impositions force people into saving money through cleaner manufacturing methods. By placing tax on things such as waste, it should make people treat waste as a resource through which recycling can actually help save money.
- Encourage people to be environmentally active and look for new ways to use energy efficiently or think of innovative ways to recycle waste products.
- Reinforce environmental regulations, i.e. force people to observe environmental policies through imposition of financial penalties.
Some studies completed in the USA, Britain and by the European Commission have shown that moving taxes from employment, income and profit on to poor energy use and pollution, have not only resulted in a cleaner environment but has increased employment levels and improved the overall economic performance of a country. This is achieved by returning savings made on green tax back into the economy.
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