Abstract
Ecotaxes have undoubtedly arrested the environmental degradation in the countries wherever it has been implemented since past three decades. However, the issues as fundamental as non-acceptance of a uniform comprehensive definition and other issues pertaining to the ambiguity of its effects on the economy plague its adoption in the countries that have historically relied on command and control (CAC) measures, the prime example of which is India. In this chapter, attempts have been made to discuss these threadbare issues and their solutions, which were examined in this book by simulating the effect of ecotaxes on various stakeholders in India. The concerns related to designing of these taxes could be narrowed down to the notion of identifying the base and optimal tax rates. The pollution coefficients of the E-SAM resulted into the five most polluting sectors such as thermal (non-hydro), fertilisers, iron and steel and non-ferrous basic metals, paper and paper products and textile and leather. Their value of output was considered as the tax base. Through an elaborate mathematical derivation and visualising the suppliers as large and small scale, it was shown that the optimal rates are just a theoretical construct and is mathematically infeasible. Therefore, it is an idealistic scenario which is unattainable. The ecotax was found to be overall progressive, thus negating the equity concerns. The double dividend could be reaped, and the effect on export competitiveness is also minimal. Thus, it could be concluded that ecotaxes would prove to be the game-changer in arresting the environmental damage while ensuring that the growth is not traded off.
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Notes
- 1.
A tax is defined as ‘Any compulsory, unrequited payment to general government-central, state or district level-depending upon the fiscal structure of the economy’ (OECD, 2006).
- 2.
A tax base in the Pigouvian context could be defined broadly as ‘any polluting factor of production/other inputs/outputs/by products on which if a tax is imposed would increase the cost of production/consumption/extraction of either the produced/consumed/or the extracted natural resource in proportion to the externality generated’.
- 3.
- 4.
Seven polluting sectors were identified: agriculture, industries, households, mining, developmental sector, transport sector and power sector.
- 5.
Ramsey’s tax is based upon the principle of inverse elasticity which implies that the tax rate should be higher for a good having lower elasticity and vice versa.
- 6.
Please refer to Sect. 4.7 for a detailed understanding of this theoretical construct.
- 7.
- 8.
- 9.
The condition for the transfer is that these firms invest the proceeds in technologies that are pro-environment.
- 10.
A tax on plastic will be useful because Indian experience shows that policies such as blanket ban on plastics just do not work.
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Verma, R. (2021). Summary and Conclusions. In: Fiscal Control of Pollution. India Studies in Business and Economics. Springer, Singapore. https://doi.org/10.1007/978-981-16-3037-8_7
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