The question of designing and imposing environmental taxes with specific objectives remains challenging due to the complexities involved.
Recently, there has been growing awareness of the imposition of environmental taxes, and a very large basket has already been designed in different countries.
An ecotax is a tax whose tax base is defined so as to internalise the negative externality generated either from the production/consumption/extraction behavior in an economy.
The basis of such taxes is aimed at capturing elements of externalities.
Such taxes are intended to discourage the overuse of natural resources that damage the ecology.
Countries like China also impose various taxes like "ecotax" on land use (1984), vehicles (2001), consumption of ecologically harmful products (1994), farmland occupation tax (1987), and pollution levy system (1982).
According to the OECD (2006), there are about 375 environmentally related taxes in the OECD countries.
The evolution of these taxes has shown that most revenue comes from energy, motor vehicle and transport taxes.
Fiscal instruments to support ecological issues
Carbon taxes are the most contentious fiscal instruments widely discussed which serve the dual purpose of acting as deterrent and raising resources from activities that impact sustainable economic development.
Some of the other taxes in this area which have also been explored globally are:
Taxes on plastic bags in Ireland were introduced in 2002. The use of plastic bags in the litter was reduced from 5% to 0.13% in 2015.
Deposit refund packaging scheme in Finland was first introduced in 1950, where a refund was provided on the deposit of used beverage packaging. Similar schemes are also in place in the UK and the USA.
Landfill tax in the UK was introduced in 1996 to reduce the amount of waste sent for landfilling and boost waste recycling.
Tax on nitrogen emissions in Sweden was introduced in 1992 to discourage activities with nitrogen emissions.
This resulted in a reduction in nitrogen emissions by 30-40%.
Fishing license in Ireland was introduced in 2007, primarily due to declining stocks of salmon and overfishing in the area.
License fees were doubled, resulting in the stabilisation of salmon stock, generated revenues with a significant impact on the river banks and restoration of riparian zones.
Ecotax in India:
Some examples of "ecotax" in India at a regional level are
Clean energy tax by the Government of India introduced in 2010, imposed on coal, peat and lignite
Gujarat Green Cess imposed on electricity, presently stayed by the courts.
Vehicle entry tax introduced in Himachal Pradesh in 2004
Tax on old vehicles introduced by 6 States in India for discouraging old vehicles which impact ecological balance.
Cess on non-biodegradable substances, introduced by Sikkim State in 2005