Sally Joseph Australian School of Taxation University of New South Wales

Different policy instruments Approaches to environmental taxation Driving corporate sustainability decisions

Different Policy Instruments Economic Instruments – Market-Based Economic Instruments – Financial Command-Control Measures Voluntary Measures

Incentive-based Economically efficient Flexible Market determined Lack of enforcement Perception of ‘right to pollute’ Market manipulative Economic Instruments – Market-Based Technological innovation Developing lower carbon economies Reduce resource use/consumption Political compromises Distortion in business decisions Increase in consumer prices

Economically efficient Flexible Targeted and precise Equitable application Discretionary Impacts not costed Earmarking – burden of proof Economic Instruments – Financial Technological innovation Developing lower carbon economies Reduce resource use/consumption Political acceptance Exemptions and exclusions Increase in consumer prices

Identified environmental issue targeted Deals with public goods and free rider issues Clarity and standardisation No incentives Inflexible Weak punitive measures Inequitable application Command-Control Measures Enforce environmental action Application of polluter pays principle Reduce resource use/consumption Technological innovation Legislation implementation timeline Legislative loop-holes

Commitment Negotiated outcomes Flexible No incentives No punitive measures Low economic efficiency Apathy Voluntary Measures Market image and perception Increase market share Employer of choice Government regulation Questionable effectiveness Resolve

Approaches to Environmental Taxation Polluter Pays Principle Technological Developments Environmental Tax Reforms

Polluter Pays Principle Aim - fairness & justice Tenet – total marginal cost of production Objective – assign responsibility Application – market & non-market instruments Implications – practicalities, burdens, apportionments, costs & behaviours

Technological Developments New sources and methods Information and transaction costs Research and development End-of-pipe technologies Incremental improvements Modeling

Environmental Tax Reforms Revenue neutral Economically unsustainable Disproportional impacts Source: United Kingdom; The Blue Book, 2008; 2010

Environmental Tax Reforms Double dividend Employment effects Environmental effects Source: Statistisches Bundesamt, Deustschland; 2009 Source: United Kingdom; The Blue Book, 2008; 2010 United Kingdom – CCL implemented 2001 Germany– ETR implemented 1999

Environmental Tax Reforms Source: Eurostat Yearbook; 2010 Double dividend Employment effects Environmental effects

Driving Corporate Decisions Internal − Risk External − Design

Risk Inaction: low risk, low benefit Proactive: high risk, high benefit Benefit Risk Innovative technology End-of-pipe technology Commercial & government collaboration Paradigm shift Political interference Command-Control measures Voluntary measures Global inequities

Design Collaboration Features Implementation Business Government Environment

Next steps Climate change resilience demands measures that proactively increase productivity whilst reducing climate impacts. Perpetuating current trade-offs perpetuates the perspective that there is always a loser in environmental taxation. To challenge this, the structure and approach to environmental taxation must enter a new paradigm.

Sally Joseph PhD with the Australian School of Taxation, University of New South Wales, Sydney, Australia A sustainable corporate tax: is ecological wealth a viable alternative to financial wealth? Developing a corporate tax model that delivers sustainable economic and environmental outcomes