These instruments specify payments to the government from a tax base of “environmental relevance,” which typically includes taxable organizations or individuals with a proven and defined negative impact on the environment. They are described as “unrequited” payments in that distributions are not proportional to payments. The intent is to increase costs of environmentally harmful activities including pollution and thus incentivize actors to reduce those activities. Industries subject to these taxes typically include energy, transport equipment or services, pollution (water, air, waste management, noise), and natural resources. It should be noted that taxes, along with other economic instruments often combine two objectives: raising revenue and influencing incentives. There are certain taxes that minimize impacts on incentives, such as income tax and value added tax (VAT) while others are designed to have an impact – such as taxes on pollution where the goal is to reduce pollution in an economical manner. In some cases, so called “sin taxes” such as those on tobacco and alcohol can generate substantial revenue as demand for these products is not very price sensitive (low demand elasticity) indicating that they must be taxed substantially if the goal is to reduce consumption. Taxes on these products as well as fossil fuels have been used for environmental and health expenditures (see Earmarking Revenues for Nature, below).
One example of an environmental tax is a plastic bag levy in Ireland. Beginning in 2002, the Irish Government began imposing a 0.15 euro charge on plastic bags which was raised to 0.22 euro in 2007. The tax has simultaneously reduced plastic bag pollution (from 5% to just 0.13% of all litter) and also raised hundreds of millions in euros for environmental projects. Another older example is the earmarking of hunting and fishing equipment taxes for state wildlife management in the USA.
Corporate Social Responsibility Tax
Special form of government taxation that requires (usually large) companies to spend a percent of their profits every year on corporate social responsibility (CSR) - usually through financing NGOs or paying into government social investment funds. The main difference from traditional taxations is that the companies will be able to decide where to invest and implement programs. This solution has been piloted in only a few countries (e.g. India, Seychelles), with limited documented evidence of its effectiveness relative to other approaches.
A Corporate Social Responsibility Tax has been put in place in the Seychelles since the year 2013, with funds raised through the tax mostly funding community projects. The tax (0.5%) is imposed on businesses with an annual turnover equal to or exceeding the liability threshold of approximately USD 75,100. To read more about the Seychelles Corporate Social Responsibility Tax, please visit here.
Taxes, Fees and Royalties in the Forestry Sector
Taxes, fees, royalties and other charges on the extraction, transport and/or use of forests and forestry activities. Following the user-pays principle (and polluter pays), these levies help to capture the benefits of production services from nature and internalize the true cost of ecosystem degradation by influencing the price of the "consumed" natural capital. Revenues may or may not be allocated to environmental purposes. The most used forms of taxation are stumpage fees, concessions fees, royalties based either on the volume or the value of the timber harvested and export levies (e.g. Ghana has applied rates from 1 to 2 per cent on timber exports).
Several countries around the world have put in place a system of taxes, fees and/or royalties in the forestry sector. Washington State enacted an excise tax, known as the timber tax, in 1971. In place of a property tax on tress, timber owners pay a 5 percent excise tax on the stumpage value of their timber when it is harvested. In 1982m the Forest Tax was extended to timber harvested from state and federal land, in addition to private land. Read more about the Washington State timber tax here.
Tariffs, Fees and Taxes in the Water Sector
General (local and national) taxes and special levies charged in exchange for a service, for example water and wastewater bills, property assessments or fees/charges applied to improve the quality of the water, and developer fees which may fund water infrastructure and watershed rehabilitation.
The Netherlands has in place two different kinds of taxes on water; a tap water tax and VAT. The stated aim of these taxes is to encourage companies and households to use water more sparingly. Tap water suppliers pay tap water tax to the Tax and Customs Administration, recharging the tax to their customers. The government charges VAT on the consumption of tap water. This has been set at the low VAT rate of 9%. To learn more about the water taxes in the Netherlands, click here.
Taxes and Fees in the wildlife sector
Taxes, fees, royalties, quotas, and permits for wildlife capture, hunting, and trade. These mechanisms can be used to generate revenue and to support the sustainable use of wildlife including wild animals, plants, and fungi.
In the state of Mississippi, conservation programs run by the Mississippi Department of Wildlife, Fisheries, and Parks (MDWFP) are almost entirely financially supported from hunters and anglers. License fees and excise taxes on hunting and fishing equipment generates $17 million and $11.4 million, respectively, for the state. Revenue from Waterfowl Stamps, which all waterfowl hunters are required to buy, contribute directly towards helping the state and federal governments to manage waterfowl habitat. To learn more about the Taxes and fees in the wildlife sector of Mississippi, or about the Waterfowl stamps specifically, please click here.
Taxes on Renewable Natural Capital
Any tax, fee, or charge paid for the extraction and/or use of renewable natural resources (e.g. timber or water). Following the polluter-pays or user-pays principles, these levies help to catpure the production value of nature and internalize the true cost of ecosystem degradation by influencing the price of the natural capital “consumed”. Note: this solution is also captured elsewhere in the catalogue including forestry and water entries.
Taxes on Natural Resources (non-renewables)
Any tax, fee, or charge paid for the consumption or economic use of non-renewable natural resources. Sometime referred to as natural capital levies, this broad category includes taxes on fuels and carbon. Such taxes help to more effectively value on non-renewable natural capital and to internalize the cost of biodiversity degradation caused by resource extraction.
In 2008, the Canadian province of British Columbia instituted a carbon tax which applies to the purchase and use of fossil fuels and covers approximately 70% of provincial greenhouse gas emissions. On April 1, 2019, the carbon tax rate was increased, and will be increased every year until 2021. New revenues generated from increasing the carbon tax will be used to: provide carbon tax relief and protect affordability, maintain industry competitiveness, and encourage new green initiatives.
To learn more about the carbon tax in British Columbia, visit here.
Taxes on Fuel
A fuel tax, fee, or charge paid for the consumption or economic use of fuel (i.e. coal, gas, oil, others). Fuels are typically utilized for transportation, building heating and cooling, industrial uses, among others. Fuel taxes can reduce the consumption of fossil fuels and greenhouse gas emissions (i.e. a carbon tax). They can also price other negative externalities such as air pollution and congestion. Tax revenues may be allocated for biodiversity protection purposes.
In the United States, the Leaking Underground Storage Tank (LUST) Trust Fund was established in 1986 in order to address petroleum releases from federally regulated underground storage tanks. Specifically, the LUST Trust Fund provides money to :
a. Oversee cleanups of petroleum releases by responsible parties
b. Enforce cleanups by recalcitrant parties
c. Pay for cleanups at sites where the owner or operator is unknown, unwilling, or unable to respond, or which require emergency action
d. Conduct inspections and other release prevention activities
The LUST Trust Fund is financed by a 0.1 cent tax on each gallon of motor fuel sold nationwide.
Find out more about the LUST Trust Fund and the 0.1 cent tax on motor fuel here.
Taxes on Pesticides and Fertilizers
Any tax, fee, or charge paid for the consumption and economic use of pesticides and fertilizers. Taxes on pesticides and fertilizers can reduce the overdue of these potentially harmful substances and decrease adverse impacts to biodiversity and habitats. Tax revenues may be allocated for biodiversity management purposes.
In France, under the law on water and the freshwater environment, 7 water taxes were introduced – including tax on diffuse pollution, which was levied on the sale of pesticides. This tax rate varied according to the toxicity of the substances, and in 2014 the revenue from the ta was approximately 110M Euros. A substantial portion of the revenue is funneled into the a strategic plan to reduce pesticide use, called the “Ecophyto Plan”. To learn more about the tax and the Ecophyto plan, please visit here.
Taxes and Fees in the Tourism Sector
The collection of taxes and fees (or comparable instruments such as the sale or auctioning of concessions) from the tourism sector and/or directly from tourists. This revenue can provide guaranteed financing for protected areas or other biodiversity conservation measures either through retaining fees, revenue sharing agreements with communities, or receiving earmarked transfers from the central government.
Known as the quintessential example of a successful, transparent green tourist fee, the Pristine Paradise Environmental Fee (PPEF) of Palau was developed to support conservation and effective management of natural resources. The fee consists of a $100 PPEF on all international airline tickets to Palau. In addition to this fee, visitors are not issued a visa until they sign a pledge promising to respect the environment and culture Palau. In the Fiscal Year of 2018, the PPEF presumably generated annual revenue well over $10M. The fee is spent in the following ways:
a. Fisheries Protection Fund: $10
b. State Government: $12.50
c. Operations of Palau International Airport: $25
d. National Treasury: $22.50
e. Protected Areas Network (PAN): $30
To get a more detailed assessment of the PPEF, please visit here.
Taxes, Fees and Quotas in the Fishery Sector
The taxation of the fishery sector and/or the introduction of fees and quotas can provide ring-fenced financing for conservation as well as influence market behavior in order to reach a biologically and economically sustainable level of fish stocks and harvests (i.e. reduce over-fishing).
Known as the quintessential example of a successful, transparent green tourist fee, the Pristine Paradise Environmental Fee (PPEF) of Palau was developed to support conservation and effective management of natural resources. The fee consists of a $100 PPEF on all international airline tickets to Palau. In addition to this fee, visitors are not issued a visa until they sign a pledge promising to respect the environment and culture Palau. In the Fiscal Year of 2018, the PPEF presumably generated annual revenue well over $10M. The fee is spent in the following ways:
· Fisheries Protection Fund: $10
· State Government: $12.50
· Operations of Palau International Airport: $25
· National Treasury: $22.50
· Protected Areas Network (PAN): $30
To get a more detailed assessment of the PPEF, please visit here.