14 May 2013: According to a series of studies that the European Environment Agency (EEA) undertook on the potential for fiscal reform in Spain, Italy, Ireland and Portugal – EU countries affected by the current economic crisis – environmental taxes can achieve environmental objectives while raising revenues and they have a “less negative effect on GDP compared to other types of taxes, such as direct taxes.”

The assessments demonstrate that environmental fiscal reform (EFR) can promote growth in countries by reducing taxation on labour and investment, such as income tax and corporation tax, and shift the tax burden to the production and consumption of environmentally-harmful goods and services.

For example, in Portugal, the study identifies the following opportunities: taxing diesel and petrol cars equally; and bringing in new taxes on a variety of goods, including drinks packaging, shopping bags and pesticides. The studies point to the multiple benefits of implementing EFR, as countries could use environmental taxes to support their fiscal consolidation or reduce other type of taxes, while changing behavior and encouraging consumers to redirect their consumption to less taxed – and less environmentally harmful- commodities.

Moreover, the study underscores that by carrying out an EFR, countries can also remove harmful subsidies, such as those for fossil fuels. These savings can be directed towards promotion of renewable energies and resource-efficient technologies. In addition, the EEA underlines that the new incentives could contribute to job creation in new sectors, as well as promote innovation in the long-term. [EEA Press Release]