Europe's Tax Shift Success Shames USA
EUROPEANS ADDRESS CLIMATE CHANGE WITHOUT HARMING ECONOMIES
New Study Shows Environmental Tax Reform Helps European Countries Reduce Harmful Emissions, Boost Employment and Keep GDP StableThe Center for a Sustainable Economy (CSE) has released Environmental Tax Reform: The European Experience, a comprehensive new study showing that several European countries have taken significant steps toward addressing climate change without harming their economies.
The report comes in time for the meeting of the Council of Parties to the UN Framework Convention on Climate Change (COP-6) in Bonn, Germany ó- a meeting where the US and its allies will once again debate international approaches to curbing greenhouse gas emissions. The European Experience analyzes the progress individual European nations have made domestically over the last decade to address climate change issues while protecting their economies.
The report focuses on environmental tax reform measures enacted in eight European countries since 1990. Environmental tax reform refers to recycling revenue from taxes on pollution or natural resource depletion to lower others, such as payroll or income taxes. The report finds that many European countries have replaced a portion of payroll or other taxes with revenues from increased taxes on carbon emitted from energy sources, sulfur dioxide, or a variety of other harmful pollutants.
"Environmental tax reform is the most flexible, least-cost approach to solving the climate problem. The European example shows that it is possible to use a market-based approach to reduce greenhouse gas emissions without harming the economy," said J. Andrew Hoerner, CSE Director of Research and co-author of The European Experience. "This is the way the world is going. If the U.S. does not follow suit, we will be facing much more expensive greenhouse gas reduction requirements further down the line."
For example, Germany generated about one percent of its total tax revenue in 1999 from an environmental tax reform package based on increased taxes on petroleum products. This tax measure enabled the German government to correspondingly cut taxes on Social Security and on investment in renewable energy technologies.
While many U.S. policymakers fear that any reforms aimed at reducing greenhouse emissions will have a negative effect on the domestic economy, evidence from analyses of more than 40 economic studies and over 100 simulations contained in The European Experience suggests just the opposite.
The report shows that well-designed environmental tax reforms can have little or no effect on GDP and can actually help to boost employment. Sixty-five percent of the economic simulations surveyed in the study determined environmental taxes to have positive or zero impact on GDP and 78 percent of simulations predict that these types of tax reforms will have a positive effect on employment.
"The European experience shows that even if the Kyoto Protocol isnít ratified, there are steps individual countries can take to address both global climate change and their domestic energy problems without hurting their economies," said Hoerner. "Regardless of the outcome of COP-6, US policymakers should consider environmental tax reform. These countries give us eight solid examples to build on."
The European Experience is a comprehensive review of the specific reforms enacted in each country and shows environmental tax reform has gained significant momentum in Europe over the last decade including several of its largest economies such as the UK, Germany, and Italy.
To view the report, visit http://sustainableeconomy.org/eurosurvey.htm
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