Norwegian report concludes that governments must explain the benefits of environmental taxes
Steffen Kallbekken, CICERO (photo: Anne Karin Sæther/Bellona)
Tue 2 Dec 2008 – A new study by the Oslo-based Center for International Climate and Environmental Research (CICERO) says that although environmental taxes can have a significant impact on global emissions, governments face a huge challenge in convincing the public and business of their value if the benefits are not explained or if the taxes are not earmarked for specific environmental purposes.
“People do not understand environmental taxes. If politicians don’t provide better information about how these taxes work, it might not be politically feasible to implement them,” says Steffen Kallbekken, a researcher at CICERO, who has recently completed a PhD on environmental tax schemes, where he looked at the trade-off between political feasibility and economic efficiency.
“There seems to be a big divide between what economists recommend and what people find acceptable. A main reason for this seems to be that people do not understand how taxes can increase welfare,” he explains.
“Earmarking is not a popular tool amongst economists because it is not efficient. However, it looks like it can sometimes be worth considering because it can increase the political feasibility of taxation.
“Politicians need to inform the public much better about the environmental benefit of taxation, and they also need to show clearly and credibly how the revenues will be used. If informing the public is not sufficient to get the necessary political support, politicians should consider different kinds of earmarking systems.”
Established by the Norwegian Government in 1990, CICERO is an independent research centre associated with the University of Oslo and conducts research on and provides information and expert advice about national and international issues related to climate change and climate policy.
The timing of the study coincides with a number of European countries seeking to introduce or raise airline passenger taxes under the guise of environmental protection. The earmarking of revenues raised by EU states from the auctioning of emissions allowances when the aviation industry joins the EU Emissions Trading Scheme in 2012 has also proved a controversial issue. The European Parliament fell short of persuading EU states to mandate the revenues for environmental measures.