The financial crisis and fiscal consolidation in green budgets

image of The financial crisis and fiscal consolidation in green budgets

This project adds insight into the potential contribution to fiscal consolidation from environmental tax and subsidy reforms, i.e. strengthening public budgets while at the same time improving economic efficiency and the environment. The report contributes with own calculations for potential revenues from environmental taxes and discusses the financial crisis and environmental tax policy responses in Iceland, Estonia and Ireland as case studies. The analysis has been carried out during the period July 2012 – December 2012 by Vista Analysis AS, Norway, Reykjavik University, Iceland and PRAXIS Center for Policy Studies, Estonia. The project was commissioned by the Nordic Council of Ministers.



Revenues from environmental tax increases

This chapter discusses the revenue potential from increasing taxes on carbon and air pollutants to a level that corresponds with marginal environmental damage. In doing so the chapter indicates the size of environmentally harmful subsidies similar to t* in chapter 3. It also discusses the revenue potential from auctioning emission allowances or quotas. We first discuss GHG policy in section 5.1 and present calculations of the potential revenues from carbon taxation (/auctioning of emission allowances) in section 5.2. In section 5.3 we study the revenue potential of air pollutants ad in section 5.4 we discuss the potential and actual revenues.


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