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Ecotaxation - History

Increased scientific knowledge about the planet has meant that we are beginning to understand the real damage that can be inflicted on the natural world. Issues such as global warming are becoming common topics and governments have needed to act. One way in which this is beginning is through eco-taxes.

The original aim of green taxes was a simple one; discouraging people from damaging the environment by making them pay for using natural resources, for example, burning fossil fuels in power stations causes acid rain; it damages the environment and should be taxed.

This still applies but there are now also additional aims of eco-tax. They are now seen as part of a wider restructuring of taxation (eco-tax reform), which will encourage not just environmentally sustainable development but also better economic performance, more jobs and greater economic justice within and between nations.

There are critics of lots of green taxes being imposed as they suggest it would be confusing and create political problems as new taxes appeared affecting different areas of society. However, a small number of beneficial taxes, targeting the right areas can only reduce the destruction of the natural world. One good example would be a tax on fossil fuel at its source.

In 1996, The British government introduced their first real environmental tax. It was called The Landfill Tax and its objectives were to reduce the amount of waste produced by industry and to encourage recycling. This tax aimed to put a value on dumping waste material, and put this cost back on to those creating the waste. In this way, it tried to include the cost of waste to the environment on to the market place, i.e. make producers of waste pay for this externality. The rate of the tax has been increased steadily since its introduction to persuade people to look for better ways of recycling each year. The British government are taking the enforcement of this tax seriously. In 1999, a haulage contractor and a farmer from Wales were convicted of evading Landfill Tax and imprisoned for a year.

Evidence does show some decrease in the amount of landfill waste. Unfortunately, there has been an increase in the amount of illegal fly tipping, perhaps by those trying to avoid paying tax on their waste.

The main polluting gas from traffic pollution is nitrogen dioxide. To try and reduce levels, the British governement introduced some green taxes and incentives. In the late 1990's, the government provided an incentive for people to purchase low emission motor vehicles by setting the levels of road tax payable each year in line with emission levels from cars. Several years later in February 2003, the Congestion Charge was introduced. This put a charge of £5 for anyone who wished to drive within a certain radius of the City of London. The figures below demonstrate levels of nitrogen dioxide in Camden, a suburb of North London. (Annual average nitrogen dioxide level in microgrammes per cubic metre: Source Camden Local Government 2002)

These figures show that in the area of Camden, there has been a small decrease over the last 5 years. Unfortunately, levels are still higher than the objective of 40 microgram’s per cubic metre, but at least it is moving in the right direction.

Ontario, Canada has also implemented green taxes to try and reduce traffic pollution. Like in the UK, the tax was based around fuel efficiency and exhaust emissions and was introduced in 1989 and then revised in 1991 to include more cars in the taxation band. Critics of the tax say it should be expanded even further to include light trucks and vans as well as including an even wider spectrum of motor vehicles in order to impact consumers' choices when buying vehicles.

In 1999 an eco-tax was introduced in Germany to counteract the problems of high energy usage and expensive labour costs. The tax on non-wage labour costs (for example social insurance) was reduced and tax on energy usage increased. This eco-tax works in two ways; cheaper labour means that the number of jobs available increases, and the energy tax forces producers to seek ways to save energy, perhaps by looking at renewable energy resources. The taxes are carefully monitored so they do not affect Germany’s economic competitiveness. Areas such as public transport enjoy a large reduction in taxes in order to encourage use, rather than forcing people to rely on environmentally unfriendly cars. The tax aims to:

  • Reduce fuel consumption of new cars
  • Increase use of public transport and car-sharing
  • Increase usage of renewable energies
  • Create new jobs in the renewable resource industry
  • Reduce C02 emissions
  • Reduce pension contributions

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