Incidence of Environmental Taxes in India: Environmentally Extended Social Accounting Matrix-Based Analysis

  • Rajat VermaEmail author
  • Barun Deb Pal
Part of the Springer Proceedings in Business and Economics book series (SPBE)


Command and control policies have failed miserably in the Indian context in preserving the environment. Thus, this paper looks at the implications of preserving environment through fiscal instruments such as environmental taxes. This has been done by using an environmentally extended social accounting matrix (ESAM) framework to design and analyse the incidence of these taxes on rural and urban household groups. Ecotaxes were found to be progressive for both the regions at 5 and 10% tax rates. However, these taxes were regressive for one household category of the rural area which could be made progressive through a minimal proportion of revenue transfer generated from the levy of these taxes.


Environmental taxes Progressive taxes Environmentally extended SAM 

JEL Classification

H23 Q53 Q58 



We are grateful to the anonymous referees for their valuable suggestions on the paper and thankful to IORA for providing an opportunity to present the paper in their conference. We are also grateful to Gokhale Institute of Politics and Economics, Pune for organising the conference and we extend our gratitude to Prof. Kakali Mukhopadhyay for providing an opportunity to publish this paper in the edited book volume.


  1. Alarcón, J., Heemst, J. V., & Jong, N. D. (2000). Extending the SAM with social and environmental indicators: An application to Bolivia. Economic Systems Research, 12(4), 473–496.CrossRefGoogle Scholar
  2. Beck, M., Rivers, N., Wigle, R., & Yonezowa, H. (2015b). Carbon tax and revenue recycling: Impacts on households in British Columbia. Resource and Energy Economics, 41, 40–69.CrossRefGoogle Scholar
  3. Beck, M., Rivers, N., & Yonezawa, H. (2015a). A rural Myth? The perceived unfairness of carbon taxes in rural communities. Retrieved November 25, 2016, from SSRN:
  4. Blackman, A., Osakwe, R., & Alpizar, F. (2009). Fuel tax incidence in developing countries: The case of Costa Rica (RFF DP 09-37).Google Scholar
  5. Cao, J. (2012). Is fuel taxation progressive or regressive in China? In T. Sterner (Ed.), Fuel taxes and the poor: The distributional effects of gasoline taxation and their implications for climate policy. Abingdon: RFF Press.Google Scholar
  6. Chelliah, R. J., Appasamy, P. P., Sankar, U., & Pandey, R. (2007). Ecotaxes on polluting inputs and outputs. New Delhi: Academic Foundation-MSE.Google Scholar
  7. Datta, A. (2010). The incidence of fuel taxation in India. Energy Economics, (32), S26–S33.CrossRefGoogle Scholar
  8. Directorate of Economics and Statistics (DES). (2012). Land use statistics-2011-12. Government of India.Google Scholar
  9. Gallardo, A., & Mardones, C. (2013). Environmentally extended social accounting matrix for Chile. Environment, Development and Sustainability, 15, 1099–1127.CrossRefGoogle Scholar
  10. Government of India. (2015). India’s intended nationally determined contribution: Working towards climate justice. New Delhi: Government of India.Google Scholar
  11. Lee, M., & Sanger, T. (2008). Is BC’s Carbon Fair? British Columbia: CCPA.Google Scholar
  12. Lenzen, M., & Schaeffer, R. (2004). Environmental and social accounting for Brazil. Environmental & Resource Economics, 27, 201–226.CrossRefGoogle Scholar
  13. Ministry of Statistics and Programme Implementation. (2008). Annual survey of industries 2007-2008. New Delhi: Government of India.Google Scholar
  14. MoEF. (2010). India: Greenhouse gas emission 2007. Ministry of Environment and Forest. New Delhi: Government of India.Google Scholar
  15. Morris, D. F., & Sterner, T. (2013). Defying conventional wisdom: Distributional impacts of fuel taxes. Gothenburg: Mistra Indigo.Google Scholar
  16. Murray, B. C., & Rivers, N. (2015). British Columbia’s revenue-neutral carbon tax: A review of the latest “grand experiment” in environmental policy. NI WP 15-04.Google Scholar
  17. Mutua, J. M., Börjesson, M., & Sterner, T. (2009). Distributional effects of transport fuel taxes in Kenya. Norwegian University of Life Sciences.Google Scholar
  18. National Remote Sensing Centre. (2011). Wastelands Atlas of India-2011. Hyderabad: National Remote Sensing Centre.Google Scholar
  19. National Sample Survey Office (NSSO). (2010). Household consumer expenditure in India-2007-08. New Delhi: Government of India.Google Scholar
  20. Pal, B. D., & Pohit, S. (2014). Environmentally extended soxial accounting matrix for climate change policy analysis for India. Jouranl of Regional Development and Planning, 3(1), 61–76.Google Scholar
  21. Pal, B. D., Ojha, V. P., Pohit, S., & Roy, J. (2015). GHG emissions and economic growth: A computable general equilibrium model based analysis for India. Springer.Google Scholar
  22. Pigou, A. C. (1932). The economics of welfare (Vol. 4). London: Macmillan and Co.Google Scholar
  23. Planning Commission. (2007). Environment and environmental regulatory mechanisms. New Delhi: Government of India.Google Scholar
  24. Porterba, J. M. (1991). Is the gasoline tax regressive? In Tax policy and the economy (Vol. 5). MIT Press.Google Scholar
  25. Pradhan, B. K., Saluja, M. R., & Sharma, A. K. (2013). A social accounting matrix for India 2007-08. IEG Working Paper (326).Google Scholar
  26. Resosudarmo, B. P., & Thorbecke, E. (1996). The impact of environmental policies on household incomes for different socio-economic classes: The case of air pollutants in Indonesia. Ecological Economics, 17, 83–94.CrossRefGoogle Scholar
  27. Ruggeri, J., & Bourgeois, J. P. (2009). The incidence of the proposed carbon tax in New Brunswick. Working Paper Series-2009-02.Google Scholar
  28. Smith, A. (1904). An inquiry into the nature and causes of the wealth of nations (5th ed.) (E. Cannan, Ed.). London: Methuen & Co., Ltd.Google Scholar
  29. Somani, A. K. (2013). Environmental tax reform and economic welfare (Doctoral Dissertation, Harvard University).Google Scholar
  30. Srivastava, D. K., & Kumar, K. K. (2014). Environment and fiscal reforms in India. New Delhi: SAGE.Google Scholar
  31. Sterner, T. E. (2012). Fuel taxes and the poor: The distributional effects of gasoline taxation and their implications for climate policy. Abingdon: RFF Press.CrossRefGoogle Scholar
  32. TERI. (2009). TERI energy data directory (TEDDY) 2009. New Delhi: TERI.Google Scholar
  33. Verma, R. (2016). Ecotaxes: A comparative study of India and China. ISEC Working Paper Series.Google Scholar
  34. Weale, M. (1997). Environmental statistics and the national accounts. In P. Dasgupta & K.-G. Mäler (eds.), The environment and emerging development issues. Oxford: Clarendon Press.Google Scholar
  35. Weizsacker, E. V. (1992). Ecological tax reform. London: Zed Books.Google Scholar
  36. World Bank. (2014). India: Green growth—Overcoming environment challenges to promote development. World Bank.Google Scholar
  37. Xie, J. (2000). An environmentally extended social accounting matrix. Environmental and Resource Economics, 391–406.CrossRefGoogle Scholar

Copyright information

© Springer Nature Singapore Pte Ltd. 2018

Authors and Affiliations

  1. 1.School of EconomicsNarsee Monjee Institute of Management StudiesBannerghatta, BengaluruIndia
  2. 2.IFPRI-South AsiaNew DelhiIndia

Personalised recommendations