Green Budget Reform in Europe: Countries at the Forefront

458 Pages·1999·13.203 MB·English

by  Kai Schlegelmilch (auth.), Kai Schlegelmilch (eds.)

Green Budget Reform in Europe
With the support of the European Commission, DG XI "Environment,
Nuclear Safety and Civil Protection", and additional funding from:
• the Ministry of Environment and Physical Planning of the Republic
of Slovenia,
• the Norwegian Ministry of Foreign Affairs,
• German Pilot Program on Institutional Development in Environment,
• the Norwegian Ministry of Finance,
• and the Austrian Federal Ministry of Environment, Youth and Family.
Springer-Verlag Berlin Heidelberg GmbH
Kai Schlegelmilch (Ed.)
Green Budget Refonn
in Europe
Countries at the Fo re front
With 20 Figures and 142 Tables
Springer
Editor
Kai Schlegelmilch
Wuppertal Institute for Climate,
Environment and Energy
Doppersberg 19
D-42103 Wuppertal / Germany
E-mail: Kai. Schlegelmilch@wupperinst. org
Tel.: [phone]
Fax: [phone]
ISBN 978-3-642-63676-9 ISBN 978-3-642-58637-8 (eBook)
DOI 10.1007/978-3-642-58637-8
Cataloging-in-Publcation data applied for
Die Deutsche Bibliothek -CIP-Einheitsaufnahme
Green budget reform : countries at the forefront ; with 138 tables /
Kai Schlegelmilch (ed.). -Berlin; Heidelberg; New York ; Barcelona; Budapest;
Hong Kong; London; Milan; Paris; Singapore; Tokyo: Springer, 1999
ISBN 978-3-642-63676-9
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Preface
Budgets have a big influence on the economy and society. With many countries,
about 50 percent of total expenditures and income pass through the budget via taxes,
charges and expenditures. In recent years many countries, e.g. in the OECD and the
EU, have tended to use this influence in an environmentally rational way. Tradi
tional environmental policy has relied on command-and-control and cnd-olpipc
technologies that have proven to be insufficient in coping with the challenge of glo
bal change. Hence, many countries have started to investigate the environmental
impacts of their budgets by looking at existing taxes and charges, as well as tax
allowances and exemptions and other relevant regulations and expenditures -even
those not meant to have a special impact on the environment. The implementation of
such findings is now broadly discussed in these countries.
This publication will contribute to the debate. It is a result of a wider project
called Green Budget Reform -Prospects in Central and Eastern Europe. initiated by
Vida Ogorelec Wagner, managing Director of Umanotera, The Sloven ian Founda
tion for Sustainable Development, and then jointly developed. proposed to the EC
and carried out in partnership with Kai Schlegelmich of the Wuppertal Institute in
Germany. The project comprised an international seminar on Green Budget Reform
in April 1997 at Lake Bled, Slovenia, and the Case Study of Sloveilla. The seminar
offered a unique opportunity for sixty-one experts and officials from ministries from
thirteen Central and Eastern European countries to get an insight into green budget
reform experiences in Western and Eastern Europe through presentations mainly
from economists from the Finance Ministries of European countries at the forefront.
The restructuring of economies and tax systems in countries of transition represents
a unique opportunity to stepwise introduce the ideas of Green Budget Reform. Many
of these countries are currently in the process of harmonising their legislation and
policies with those of the EU, however, the debate about the Eco-Tax Reform has
not yet found its way to most of the government decision makers responsible for
fiscal policy. In the seminar workshops, participants discussed issues and raised ques
tions about applying the reform in their regions. The proceedings of the seminar.
edited by Kai Schlegelmilch. are published in the first part of this hook.
The second part of the book includes the Case Study of Slovenia. Tania Markovic
Hribernik. Assistant Professor at the University of Maribor in Slovenia. joined the
project team to carry out the case study under the guidance of and with substantial
contributions and editing by Kai Schlegelmilch (co-author).
A great deal has already been written about environmental taxes. c.g. by the OECD.
the Nordic Council, the European Commission, the European Environment Agency
and other institutions. A few publications also focus on Central and Eastern Euro
pean Countries (CEEC). However, such a comprehensive study has likely not heen
VI Preface
done for a country in CEE so far, and it is the first for Slovenia. Given that Slovenia
was one of those countries which the European Commission recently proposed to
become a full Member State of the EU, this examination should be of particular
value for all stakeholders. Furthermore, some new methodologies were developed
and applied for the first time, e.g. the assignment of expenditures and taxes to the
production factors of labour, capital, and natural resources.
We would hereby like to thank the various institutions funding this project: DG
XI of the European Commission bearing almost half of the costs involved, the Min
istry of Environment and Physical Planning of the Republic of Slovenia, the Norwe
gian Ministry of Foreign Affairs, Pilot Program on Institutional Development in
Environment, the Norwegian Ministry of Finance, and the Austrian Federal Minis
try of Environment, Youth and Family.
We are especially grateful to the speakers, whose contributions are published in
this publication, and the participants of the seminar. The seminar would not have
been such a success without them. Furthermore we are grateful to the many people
who assisted us in the process of writing this study and in collecting the necessary
information. In particular, we would like to thank Bojan Radej from the Institute of
Macroeconomic Analysis and Development in Ljubljana, who added exceptional
value to the study. Anne Williams, a British consultant within the PH ARE program
and temporarily working in the Slovenian Environment Ministry, also made some
useful comments on a draft of the study. Furthermore, we thank the 4th year students
of the Department of Economics at the School of Business and Economics, Univer
sity of Maribor, for their help in this project, especially Renata Cucek. Mateja Rozman.
Aleksandra Murks as well as the graduate student AleS Delakorda. We would also
like to thank Dr. Ales Hribernik from the Faculty of Mechanical Engineering at the
University of Maribor for his suggestions and advisory work regarding technical
questions. Further comments on earlier drafts ofthe study were given hy Edda Mi.iller
(Wuppertal Institute) and Stephan Paulus (PVI). Bojan Mavec from the Statistical
Office of the Republic of Slovenia, Ljubljana, provided some data for the study.
Several ministries also helped us in getting the right information. In addition, we are
grateful for the English proof-reading of the study by William G. Wagner. as well as
the staff at the Wuppertal Institute. The usual disclaimer applies.
Finally, we would like to thank our families, in particular our daughters, Sophie.
Ana and Tina, who shared the burden that we forced upon them with patience and
understanding. We hope that all in all they will benefit from the efforts we put in this
study.
Kai Schlegelmilch
Vida Ogorelec Wagner
Tanja Markovic-Hribernik
Table of Contents
Preface ........................................ . . ....... V
Table of Contents .................................. . . .. VII
List of Tables and Figures .......................... ............. XV II
Curricula Vitae of Contributors . . . . . . . . . . . . . . . . . . . . . .. . ............ XXIII
Abbreviations and Acronyms ......................... . . ... XXIX
I. Green Budget Reform in European Countries·
Proceedings of the International Seminar, Slovenia, 1997
1.1 Introduction to the Green Budget Reform Seminar
Kai Schlegelmilch ............................ , , . 3
1.1 General Introduction .................... , . . . . . . .. .. 3
1.2 Green Budget Reform ................... . , .3
1.2.1 Reasons for Green Budget ReformlEcological Taxes ......... 6
1.2.2 Past Trends in the Use of Environmental/Energy Taxes .. R
1.2.3 Improvements in Five Key Areas ..... , .. , , . . . .. .. <)
1.2.4 Environmental Effectiveness of Selected Environmental Taxes ... <)
1.3 Political Barriers . . . . . . . . . . . . . . . . . . . . . . . . , , , . . . .. . I I
1.4 Recommendations ............................. "., ... , .. 12
1.5 Checklist for the Successful Implementation of Environmental Taxes . 12
References ................................ , . I 3
VIII Table of Contents
1.2 Opportunities for Increased Use of Environmental Taxes
and Charges in EU Member States and CEECs
Hans Bergman ................................................... 15
2.1 Introduction ............................................ 15
2.2 The Environment and the Treaty ............................ 15
2.3 From Environmental Levies to a Less Distortionary Tax System ... 16
2.4 EU Legislation Affecting How Member States Can Use
Environmental Taxes ..................................... 16
2.4.1 Prohibition of Custom Duties .......................... 17
2.4.2 Internal Taxation .................................... 17
2.4.3 State Aid .......................................... 17
2.4.4 Secondary Legislation on Indirect Taxation ............... 18
2.5 Role of the European Commission ........................... 18
2.6 Towards a Comprehensive Approach to Energy Taxation ......... 18
2.6.1 The CarbonfEnergy Tax Proposal ....................... 19
2.6.2 The Emergence of a New Approach to Energy Taxation ..... 19
2.7 Approximation of CEECs to EU Environmental Taxation ........ 20
2.8 Green Tax Reforms or Environmental Funds? .................. 21
2.9 Conclusions ............................................ 21
1.3 Green Budget Reform: Macroeconomic Impacts and Impacts on Innovation
Michael Kohlhaas ................................................. 23
3.1 The Concept of a Green Budget Reform ...................... 23
3.2 Macroeconomic Impacts of a Green Budget Reform ............ 24
3.2.1 Scenario of an Ecological Tax Reform ................... 24
3.2.2 Modelling Aspects and Some Important Results ........... 25
3.2.3 Sectoral Price Developments ........................... 25
3.2.4 Positive Effects on the Economy as a Whole .............. 27
3.2.5 Competitiveness of Energy-Intensive Sectors.
Structural Change and Innovation ....................... 29
3.3 Final Remarks ........................................... 31
References .................................................. 32
1.4 Empirical Assessment of an Energy Tax Proposal for Austria
Angela Koppl ..................................................... 33
4.1 Introduction ............................................ 33
4.2 The Energy Tax Proposals Simulated ......................... 33
4.3 Simulation Results ....................................... 36
4.4 Conclusions ............................................ 39
References .................................................. 40
Table of Contents IX
1.5 Cohesion Countries: Experience in Countries on the European Periphery
Sue Scott/Frank Convery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.1 Introduction ............................................ 41
5.2 Compliance Costs of Meeting EU Environmental Directives ...... 41
5.2.1 Lesson One: Costs of Treatment Rise Sharply with
Increasing Degrees of Treatment . . . . . . . . . . . . . .. . ..... .43
5.2.2 Lesson Two: Determine the Desired Ambient Quality First,
Before the Emissions Standard ................. . ..... 44
5.2.3 Lesson Three: Consider Operating Costs ................. 44
5.2.4 Lesson Four: Institute Cost Recovery and PPP to Encourage
Innovation and Efficient Use. . . . . . . . . . . . .45
5.2.5 Lesson Five: Consult with Potential Customers ............ 45
5.2.6 Lesson Six: Address Non-point Sources, from Agriculture for
Example ...................... " ... . . ...... 46
5.3 Conclusions ............................... . ...... .47
Appendix I: Directives Analysed in Estimating Compliance Costs
Described in the Text ..................... . ............. 47
Appendix 2: Summary of Economic Instruments in Use III Ireland ...... 4S
References ................................ . ......... 49
1.6 Green Tax Reform in Denmark
Jens Holger Helbo Hansen .......................................... 51
6.1 Description of the Danish CO and Energy Taxes ........ 51
2
6.2 General Tax Reform 1994-1998 . . . . . . . . . . . . . . . . . .. . ........ 54
6.3 Green Taxes and Industry .................. . . ... 55
6.4 Nitrogen Tax .................................. . . .. 56
6.5 Pesticides Tax ......................... . .58
6.6 Tax on Chlorinated Solvents ............ . · .59
6.7 Tax on NiCd Batteries .................. . · .59
6.8 Recycling of Tax Revenue to Industry ..... . · .60
6.9 The Macro-Economic Effects to the Energy Tax on Industry · .61
6.9.1 The Effect on Costs ................ . . .......... 61
6.9.2 The Effect on Employment .......... . . ........ 62
6.9.3 The Effects an Individual Trades and Enterprises ........... 62
6.10 Overview of Danish Energy and CO Taxes ... . . ......... 64
2
References ................................ . ....... ... . .66
1.7 Green Tax Reforms: Some Experiences from Sweden
Runar Brannlund ................................ . . . . . . . . 67
7.1 Introduction ........................... . ..... 67
7.2 Environmental Policy in Sweden ........... . .. 67
7.3 The Swedish Green Tax Commission ....... . .74
7.3.1 Background and Terms of Reference ... . ............ 74
7.3.2 Proposals and Recommendations from the Commission ..... 75
X Table of Contents
7.4 Are Eco-Taxes Working in Sweden? ......................... 76
7.4.1 Energy Use in Sweden ............................... 77
7.4.1.1 Industry ..................................... 79
7.4.1.2 The Household Sector .......................... 80
7.4.2 Simulations of Tax Reforms ........................... 82
7.5 Green Tax Reforms -a General Equilibrium Analysis ............ 84
7.5.1 The Double Dividend Issue ............................ 84
7.5.2 A General Equilibrium Model for Sweden ................ 85
7.5.3 Scenarios .......................................... 86
7.6 Summary and Concluding Remarks .......................... 90
References .................................................. 91
1.8 Policies for a Better Environment and High Employment
Thorvald Moe .................................................... 93
8.1 A Sustainable Policy Framework ........................... 93
8.2 Norwegian Work in the 1990s .............................. 95
8.3 Main Elements in The Norwegian Green Tax Commission: An Inte-
grated Approach to Environmental and Economic Developments .. 97
8.4 Macroeconomic Effects: Some Numerical Illustrations .......... 99
8.5 Some Concluding Remarks ............................... 101
8.6 Annex: The Norwegian Green Tax Commission ............... 103
8.6.1 Proposals that Can Be Implemented in the Short Term ..... 104
6.6.2 Proposals that Require Some Further Technical Clarification
Before Implementation .............................. 105
8.6.3 Proposals that Need Some Further Investigation .......... 106
8.6.4 Revenue .......................................... 107
1.9 Report on the Concrete Steps of Green Budget/Tax Reform
in the Netherlands -Retrospective and Outlook
Anthony Zom ................................................ 109
9.1 Indirect Taxes .......................................... 109
9.1.1 History: Shift from Fundraising Charges to General
Environmental Taxes ................................ 109
9.1.2 Tax on Extraction of Groundwater ..................... I 10
9.1.3 Tax on Waste Disposal ............................... III
9.1.4 Fuel Tax .......................................... 112
9.1.5 Tax on Uranium .................................... 113
9.1.6 Regulatory Energy Tax .............................. 113
9.2 Direct Taxes ........................................... 115
9.2.1 Free Depreciation on Environmental Investment (VAMIL) .. 115
9.2.2 Tax Relieffor Benefits from Green Investments ........... 116
9.2.3 Energy Investment Tax Credit (EITC) .................. 117
9.3 Green Tax Commission .................................. 117
References ................................................. I 19