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Global taxes pave the path to protect the environment

Environmental taxes are those established to penalize actions that affect the environment. They are fundamental to reversing climate change since they are founded on the straightforward tenet “those who pollute, pay.” Environmental taxes are defined as “those whose tax base consists of a physical unit (or similar) of some material that has a negative, verified, and specific impact on the environment” in the statistical framework created jointly in 1997 by Eurostat, the European Commission, the Organization for Economic Cooperation and Development (OECD), and the International Energy Agency (IEA). In an uncontrolled situation, a business could produce a product in a polluting fashion without taking the health of the earth or the environment into account. This is referred to as an externality in economics. The goal of green taxes is to enforce the “polluter pays” concept by making polluters pay a price that reflects the cost of these externalities.

When it comes to identifying environmental taxes as a crucial instrument for achieving a decarbonized economy that supports sustainable development, there is virtually complete agreement. The following stand out among the primary advantages that support the presence of these taxes. The harmful externalities are internalized by them. They encourage the use of renewable energy sources and energy efficiency. They discourage actions that are anti-ecological. Environmental taxes also encourage businesses to innovate in terms of sustainability. Governments can decrease other taxes or fund environmental programs thanks to the money they bring in.

The IMF has suggested that the nations with the highest greenhouse gas emissions implement a levy on CO2 emissions. This group estimates that in 2030, this fee would need to be USD 75/68 EUR per ton.

According to the organization, this tariff will primarily affect how much coal is used to produce power. This kind of tax aims to replace more polluting energy sources with cleaner ones, like renewables.

Each country has its own design regarding environmental taxes. In spite of this, there are still some main taxable facts with environmental interest at the international level. Those are the primarily created by combustion vehicles nitrogen monoxide (NO) and nitrogen dioxide (NO2) emissions, acid rain is primarily caused by sulphur dioxide (SO2) emissions, which are mostly produced by burning coal and petroleum products, handling of waste (domestic, commercials, industrials, construction, etc), the commotion caused by an aircraft’s takeoff and landing, energy items that release CO2 emissions when burned, such as gasoline, diesel, natural gas, coal, and fuels used to produce electricity, water pollution sources (pesticides, artificial fertilizers, acids, etc), earth modification, resource extraction, and utilization, the carbon dioxide emissions (CO2), items that thin the ozone layer, and transport (polluting vehicle registration, use, import or sales).

Energy is the sector of the economy that is most impacted by environmental taxes. Energy taxes, according to Eurostat, made up more than three-quarters of all environmental tax revenues in the European Union (EU) in 2020 (77.2 percent of the total), far outpacing taxes on transportation (19.1 percent), pollution, and resources (3.7 percent).

By Yimeng Chen

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