Environmental Policy

II. Basic Issues Pertaining to Environmental Taxes and Charges - E. :Utilization of Economic Instruments in Environmental Policies - Taxes and Charges

II. Basic Issues Pertaining to Environmental Taxes and Charges

E. International Impact and Mitigation Measures

The differing environmental policies of countries will be adjusted by foreign exchange rates, along with other factors, and a strict environmental policy does not immediately create trade deficits. Furthermore, it is possible to consider country border taxes adjustment for products exchanged in the international market when dealing with countries that do not take similar economic measures to protect the environment. Border tax adjustments involve taxing imported goods and adding the tax on similar exported goods in order to neutralize the impact the imported goods have on competition. The following are arguments in favor of border tax adjustments:

  • How much can be achieved in terms of environmental targets. For products that cause environmental pollution in the location in which they were consumed, it can be considered effective to tax domestic consumption using border tax adjustments. However, if the product causes pollution in the country of origin, border tax adjustments may help restrain domestic consumption, but will increase export, and the pollution created by production of exported goods will not be reduced. Furthermore, if the consumption of the product produces pollution in the country in which it was consumed, the impact of taxation on domestic consumption caused by border tax adjustments will be limited to the decreased amount of domestic consumption and will not serve to reduce pollution in countries where the product was consumed.
  • How much can be accepted under international trading rules? After the Uruguay Round, GATT specified interim input material such as energy and fuel as subjects of border tax adjustments, allowing room for economic measures such as environmental taxes and charges to be a subject of border tax adjustments. However, in the future it will be necessary to give technical consideration to the implementation process when deciding if border tax adjustments are possible when taxing environmental pollution caused by the process of producing the product

Elsewhere, one must also take into consideration the short-term impact of change in economic activity on developing countries when implementing environmental taxes and charges such as measures to curb the rapid decrease in demand of specified products.


OECD, 1993,
Taxation and the Environment
OECD, 1994,
Managing the Environment - The Role of Economic Instrument
OECD, 1995,
Environmental Taxes in OECD Countries: a Second Survey
OECD, 1996a,
Implementation Strategies for Environmental Taxes
OECD, 1996b,
IIntegrating Environment and Economy - Progress in the 1990s: background paper for the OECD Environmental Policy Committee at the Ministerial Level held in February 1996
J.P. Barde, 1995,
Implementing Environmental Taxes in OECD Countries: Lessons From Experience and Current Issues, Report at Environmental Protection Vision Symposium in November 1995

Situation of Environment Tax in Nordic Countries and Evaluation of Their Political Measures

Nordic Council of Minister, 1994, The Use of Economic Instruments in Nordic Environmental Policy
Thovald Moe, 1995, Green Taxes, Employment and the Environment: Some Nordic Experiences

Evaluation and Analysis in States in the United States and Other European Nations

Robert Gale and Stephan Barg with Alexander Gillies, 1995, Green Budget Reform - An International Casebook of Leading Practices (IISD/Earthscan)

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