Economic Instruments in Chemicals Policy

Past Experiences and Prospects for Future Use

image of Economic Instruments in Chemicals Policy

This report investigates the potential for increased use of economic instruments, not the least taxes and charges, in chemcials policy. It provides a conceptual discussion of the role of different market-based instruments in controlling pollution based on chemicals production and use, and outlines a comprehensive overview and analysis of the European experiences of taxes and charges in chemicals policy during the last decades. A final chapter evaluates a set of carefully selected economic instruments targeted at specific chemical compounds and products. The cases have been chosen so as to illustrate different types of challenges in relying more extensively on economic instruments in chemicals policy, and they include the use of: (a) different types of two-stroke oils, (b) the substance nonylphenol (NP) and its ethoxylates (NPEs), which break down into NPs, and (c) ethylene glycol. The report has been commissioned by the Working Group on Environment and Economics under the Nordic Council of Ministers.



Experiences of environmental taxes in European chemicals policy

In chapter 2 we argued that economic instruments for selected chemical compounds and products can represent relatively efficient policy instruments to reduce negative health and environmental impacts. In this chapter we review and survey the experiences of such instruments in different European (and in particular the Nordic) countries. Two groups of chemicals are covered by the analysis; chemicals used in agriculture (fertilizers and pesticides) (sections 3.2–3.3), and hazardous chemicals (in particular chlorinated solvents) (section 3.4). In practice the most commonly used economic instrument is an input tax (or fee). Such a tax represents one way of reducing pollution from non-point sources when direct emission control measures are difficult and costly and the implementation of firstbest instruments thus becomes unfeasible (e.g., Romstad, 1999). In the analysis we devote quite a lot of attention to the case of fertilizer taxes, partly since this represents a case where the impacts of earmarking, signalling effects and earmarking of tax revenues are well illustrated. Section 3.5 provides some summarizing remarks and implications for the future use of economic instruments on chemical compounds and products.


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