13 October 2010: The Organisation for Economic Co-operation and Development (OECD) has published a study, entitled “Taxation, Innovation and the Environment,” that addresses the questions: Do green taxes prompt innovation? What types of innovation result, and what benefits do they bring? And does taxation design play a critical role?

The report’s main premise is that innovation is critical to achieving environmental outcomes at a reasonable cost. It illustrates the various positive impacts environmentally-related taxation has on green innovation, noting that these taxes are already widely used in OECD countries. It discusses the important role that tax design has on outcomes, with higher taxes creating higher incentives to alter practices and technologies, and predictable taxes helping encourage investment.

The report contains chapters on: current use of environmentally-related taxation; effectiveness of environmentally-related taxation on innovation; tax design considerations and other tax-based instruments; and green taxation for policy makers. It also features nine annexes outlining case studies of environmental tax design and implementation including the UK’s Climate Change Levy and Climate Change Agreements. [Publication Website] [Executive Summary]