MOHD SUFIYAN KHAN & DR. MIRZA JUNED BEG
Green taxation is a policy instrument designed to promote environmental protection through the use of economic incentives. It involves the imposition of taxes or fees on environmentally harmful activities or products to discourage their use and encourage alternative, more environmentally friendly practices or products. The revenues generated from these taxes are often used to fund environmental programs and initiatives.
The concept of green tax can be traced back to the early 20th century, when some countries began to introduce tax policies to encourage the use of cleaner and more sustainable technologies. However, the popularity of green taxes gained momentum in the 1970s with the emergence of environmental movements and the growing concerns about the impact of human activities on the environment.
In the early 1990s, the concept of “ecological tax reform” gained popularity in Europe, which aimed to shift the tax burden from labor and capital to natural resources and pollution. The proponents of ecological tax reform argued that such policies would benefit the environment, promote sustainable development, and stimulate economic growth.
The first country to introduce a comprehensive green tax reform program was Denmark in 1992, which included a range of taxes on energy consumption, waste disposal, and emissions from transportation. Other European countries followed suit, with Germany, Netherlands, and Sweden introducing similar reforms in the late 1990s.
Since then, green tax policies have become increasingly popular globally, with many countries introducing new taxes or increasing the rates of existing ones. The United Nations and other international organizations have also highlighted the importance of green taxes as a key tool for addressing climate change and promoting sustainable development.
Concepts of Green Taxation
The key concepts of green taxation include:
- Internalizing externalities: Green taxes aim to internalize the environmental costs associated with economic activities by making polluters pay for the damage caused to the environment.
- Market-based approach: Green taxes use market-based incentives to influence consumer behavior and encourage more sustainable choices.
- Polluter pays principle: Green taxes are based on the principle that the polluter should pay for the damage caused to the environment, rather than passing the costs onto
- Revenue neutrality: Green taxes can be designed to be revenue-neutral, meaning that the revenues generated are used to reduce taxes in other areas, such as income or payroll
- Equity considerations: Although green taxes may have a regressive impact on low- income households, there are ways to mitigate this impact, such as providing targeted subsidies or using the revenue to fund social
Definition of Green Tax
The International Organization defines green tax in relation to sustainable living and environmental protection and conservation.
The Organisation for Economic Co-operation and Development (OECD) defines green taxes as:
“explicit pricing mechanisms for environmental goods and services, provided through pollution taxes, resource taxes, transport taxes, or other fiscal instruments that reflect the costs, and benefits of environmental protection.”
Similarly, the United Nations Environment Programme (UNEP) defines green taxes as: “Fiscal measures that are designed to promote ecologically sustainable activities and protect the environment by internalizing the costs of environmental damages associated with economic activities.”
These definitions highlight the goal of green taxes to incentivize environmentally sustainable behavior and discourage activities that harm the environment.
International Legal Norms Advocating Green Tax
There are several international legal norms advocating green tax, including:
- United Nations Framework Convention on Climate Change (UNFCCC): This is an international treaty that aims to stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous human interference with the climate The treaty recognizes the role of financial mechanisms, including taxes, to incentivize the reduction of greenhouse gas emissions.
- Paris Agreement: This is an international treaty under the UNFCCC that sets out a framework for countries to undertake ambitious efforts to combat climate change and adapt to its effects. The agreement recognizes the importance of market mechanisms, including taxes, to support the implementation of nationally determined contributions (NDCs) to reduce greenhouse gas
- World Trade Organization (WTO) Agreements: The WTO has a number of agreements that have implications for green taxes, including the General Agreement on Tariffs and Trade (GATT) and the Agreement on Subsidies and Countervailing Measures. These agreements provide rules and norms on trade-related measures, including taxes, that can be used by governments to promote environmental
- European Union (EU) Directives: The EU has implemented several directives that promote the use of green taxes, including the Energy Taxation Directive, which sets minimum rates for taxes on energy products, and the Directive on the Promotion of Clean and Energy-efficient Road Transport Vehicles, which provides incentives for the use of low-emission vehicles through tax
- Organization for Economic Cooperation and Development (OECD) Recommendations: The OECD has provided several recommendations on the use of green taxes, including the use of carbon taxes to incentivize the reduction of greenhouse gas emissions and the use of environmental taxes to promote resource efficiency and pollution
Indian Legal Norms Advocating Green Tax
India has implemented several laws and policies promoting the imposition of green taxes as a means of encouraging environmentally sustainable behaviour. Some of these laws and policies include:
- The Water (Prevention and Control of Pollution) Act, 1974: The Act regulates the discharge of pollutants into water bodies and stipulates the imposition of penalties, including green taxes, on industries that violate the provisions of the
- The Air (Prevention and Control of Pollution) Act, 1981: The Act regulates the release of pollutants into the air and provides for the imposition of penalties and green taxes on industries that violate its
- The Energy Conservation Act, 2001: The Act promotes the efficient use of energy in industries and encourages the use of renewable sources of energy. It also provides for the imposition of a green tax on industries that consume excessive
- The National Green Tribunal (NGT) Act, 2010: The NGT was established to adjudicate and provide relief and compensation for environmental damage caused by individuals or industries. The Act empowers the Tribunal to levy green taxes on polluting
- The Goods and Services Tax (GST) Regime: The GST regime in India imposes taxes on the manufacturing, sale, and consumption of goods and services. In addition, the GST provides for a cess on goods and services that cause environmental damage, such as coal, oil, and plastic
These laws and policies play a crucial role in promoting sustainable development in India and reducing the impact of industrial activities on the environment.
Institutions in India which Focusing on Green Tax
The Indian legal system has a number of laws and institutions advocating for the use of green taxes as an important tool for protecting the environment. Here are a few examples:
- The Central Pollution Control Board (CPCB): The CPCB is a statutory organization that coordinates and monitors environmental issues in The board has the authority to levy penalties and fines, including green taxes, on any person or industry that causes environmental pollution.
- The Ministry of Environment, Forest and Climate Change (MoEFCC): This ministry is responsible for formulating and implementing policies related to environmental protection in India. One of its key objectives is to promote the use of green taxes as a tool for environmental conservation and pollution
- The National Green Tribunal: This tribunal was established in 2010 to provide effective and fast-track resolution of environmental disputes involving central and state governments, industries, and individuals. The tribunal has the power to impose green taxes on industries that violate environmental
- The National Clean Energy Fund: This fund was established in 2010 as a dedicated fund to promote clean energy technologies in India. The government imposes a green tax on every tonne of coal produced or imported, and the revenue generated from this tax is deposited in the National Clean Energy
Therefore, these institutions and laws demonstrate India’s commitment for promoting sustainable development and environmental conservation through the use of green taxes.
Issues and Challenges for Imposing Green Tax in India
Implementing green tax in India is a complex issue that poses a variety of challenges. Some of the key issues and challenges are
- Political Will: The implementation of green tax requires strong political will and commitment from the It involves a comprehensive planning process, laws, and regulations that must be enforced strictly.
- Public Resistance: Another challenge that may arise is public resistance. The people may oppose the introduction of a new tax, seeing it as an additional
- Lack of awareness: A significant obstacle to the implementation of the green tax scheme is the lack of awareness about the idea’s benefits. The government needs to make its case and educate the public to gain
- Enforcement Issues: Enforcement of green tax is a major challenge as it requires strict auditing and monitoring mechanisms, which depend on the availability of technology and
- Corruption: Corruption is a significant issue in India, and the implementation of green tax schemes may be vulnerable to corruption if not monitored carefully.
- Inter-State Disputes: The implementation of green tax may create conflicts and disputes between different states and the central
- Structural Challenges: India’s economy is diverse, with multiple industries, subsectors, and regions, making it challenging to design and implement a uniform green tax at the national
- Data Availability: The availability of reliable and accurate data is crucial for implementing the green tax However, India’s data infrastructure and management remain weak in many areas.
In short, implementing a green tax system in India requires addressing complex challenges and issues, significant political will, and effective monitoring mechanisms.
Economic incentives such as green taxes can create attractive markets for environmentally sound products and process technologies. The design of green tax systems is crucial if sustainable living is to be attained in the face of challenges such as globalization, climate change and ageing populations, while supporting inclusive growth, high employment and an equitable income distribution. Sustainable tax systems should consider economic, social and environmental perspectives.
It may be concluded that the initial focus on the double dividend hypothesis has strongly limited the impact of green taxes. A green tax reform based on consumption taxes that are differentiated according to the environmental impact of products could be more effective and efficient.
(Mohd Sufiyan Khan is LL.M Student, TERI School of Advanced Studies, New Delhi, Email: Sufiyan.email@example.com. Dr. Mirza juned beg is Assistant Professor of Law, Lucknow, Email: firstname.lastname@example.org)