As effective environmental taxes eventually erode the tax base in the long term, the main objective of such taxes must shift from revenue generation to achieving the EU’s environmental and climate objectives, says the European Environment Agency (EEA) in a briefing note published on Monday 7 February.
This note on ‘The role of environmental taxation in supporting sustainability transitions’ highlights that revenues from environmental taxes, which the European Green Deal recognises as crucial, can support investments in sustainability transitions. However, future revenue streams from these taxes will erode as the EU’s environmental and climate policy objectives are met.
In addition, the relative share of environmental taxes to total tax revenues has also decreased over the last two decades.
The EEA notes that, in the case of the phasing out of environmentally harmful subsidies, there has generally been no substantial increase in revenue from environmental taxes.
Revenues from environmental taxes in the EU increased to €330 billion in 2019, but the share of environmental taxes of total tax revenue has decreased from 6.6% in 2002 to 5.9% in 2019. The trend varies across Europe, but critically, the share has fallen in countries that have pioneered the implementation of environmental taxes, such as Denmark, Norway and Sweden, the EEA notes.
See the EEA briefing note: https://aeur.eu/f/7r (Original version in French by Aminata Niang)