Green tax
Also called: Environmental tax, Eco-tax · Topic: Environment and Sustainable Development · NCERT: Beyond NCERT
Meaning
A green tax is a tax on goods or activities that harm the environment, such as polluting fuels or old vehicles. It makes polluters pay part of the damage they cause, which pushes them towards cleaner choices. The idea comes from the Pigouvian tax, a tax set equal to the extra damage caused by pollution. The money raised can also fund clean projects.
Example
India levied a Clean Energy Cess on coal of ₹50 a tonne in 2010. It was raised to ₹400 a tonne by 2016 and was merged into the GST compensation cess in 2017. Other Indian examples are the green tax on old vehicles and Delhi's environment compensation charge on trucks.
Don't confuse with
- Carbon tax: a green tax aimed specifically at greenhouse gas emissions. A green tax is the broader family and can target any environmental harm.
- Cap-and-trade: fixes the total quantity of emissions and lets the permit price vary. A tax fixes the price and leaves the quantity uncertain.
Related concepts
- Internalisation of externalities
- Carbon pricing
- Social cost of carbon
- Internal carbon price
- Fossil fuel subsidies
- Cap-and-trade
- Carbon market
- Compliance carbon market
- Voluntary carbon market
- Carbon credit