1. Measuring the the implementation of ecological tax reform in Estonia, present state and way forward
23nd Meeting of the London Group on Environmental Accounting
San Jose, October 2017
Kaia Oras, Statistics Estonia

2. environmental effectiveness (effect of the tax on the tax base)
Since 2005 Estonia has been implementing the ecological tax reform (ETR)
Key principle of an ecological tax reform: partial re-orientation of taxes from taxation of income to the taxation of the use of natural resources and pollution of nature.
Aspects to be taken into account in the monitoring of the implementation of ETR*:
environmental effectiveness (effect of the tax on the tax base)
revenue neutrality zero impact on total tax burden
sectoral competitiveness
equity
use of the revenues
* - The Political Economy of Environmentally Related Taxes. (2006). OECD.
Monitoring of the ecological tax reform in Estonia; Kaia Oras

3. Dimensions to be covered in monitoring of the ecological tax reform *
environmental
effectiveness
use of the revenues
revenue neutrality
equity of the
environmental taxes
competitivness
* - Environmental tax reform base document. Estonian Ministry of Finance, 2005
- Environmental Taxation A Guide for Policy Makers, OECD, 2011
Monitoring of the ecological tax reform in Estonia; Kaia Oras

4. ENVIRONMENTAL EFFECTIVNESS
Monitoring of the ecological tax reform in Estonia; Kaia Oras

5. Environmental effectiveness: changes in resource use and environmental pressures, selected trends, 2005–2014, 2005=0, %
Red columns (upper seven) refer for the selected main trends which have gone worse
Green columns are some main positive trends
Monitoring of the ecological tax reform in Estonia; Kaia Oras

6. Environmental effectiveness, effect of the tax on the tax base Households electricity consumption and payments of excise duty on electricity (2008=100%),
Positive effect of the electricity excise duty on the tax base: households electricity consumption has started to decline in 2010
Monitoring of the ecological tax reform in Estonia; Kaia Oras

7. REVENUE NEUTRALITY
Monitoring of the ecological tax reform in Estonia; Kaia Oras

8. Share of labour taxes versus environmental taxes in GDP Increase of the taxation of environmental pressures and resource use in combination of the decrease of the taxation of labour were the main instruments foreseen to implement ecological tax reform.
1% reduction of the rate of social contributions per year
Monitoring of the ecological tax reform in Estonia; Kaia Oras

9. Is there a zero impact on total tax burden?
Changes in burden of social contributions and environmental taxes,
Measuring the effectiveness of the implementation of ecological tax reform in Estonia, Kaia Oras
Monitoring of the ecological tax reform in Estonia; Kaia Oras

10. COMPETITIVNESS
Monitoring of the ecological tax reform in Estonia; Kaia Oras

11. Is there a zero impact on sectoral competitiveness
Is there a zero impact on sectoral competitiveness? Environmental taxes (and charges) in comparison to operating surplus, 2014.
Land transport’s environmental taxes exceed their operating surplus in relative terms.
Mining and energy sector has 4 times higher surplus compare to environmental charges they pay.
Monitoring of the ecological tax reform in Estonia; Kaia Oras

12. EQUITY
Monitoring of the ecological tax reform in Estonia; Kaia Oras

13. Equity of environmental taxes: relative distribution of the payments of excise duty on transport fuels and transport fuels consumption by economic activity, 2014
Monitoring of the ecological tax reform in Estonia; Kaia Oras

14. Equity issues and environmental effectiveness: transport fuels consumption and excise duty trends in sectors
Monitoring of the ecological tax reform in Estonia; Kaia Oras

15. Environmental effectiveness and equity: distribution of environmental taxes (on the right ) among selected main activities. Total air emissions (as a proxy for environmental pollution) are displayed on the left. Data refer for 2014.
Monitoring of the ecological tax reform in Estonia; Kaia Oras

16. USE OF THE REVENUES
Monitoring of the ecological tax reform in Estonia; Kaia Oras

17. Analyses have revealed a space for improvement in most of the dimensions ecological tax reform:
Environmental efficiency has been quite low The principle of the revenue neutrality was not due for some sectors Distribution of taxes among industries is not fair in some cases Impact on the competitiveness of enterprises could provide useful signals. The revenues from environmental taxes are much higher than spending on environment (however the classification issues do not allow in some cases straightforward analyses)
Monitoring of the ecological tax reform in Estonia; Kaia Oras

18. WAY FORWARD
Monitoring of the ecological tax reform in Estonia; Kaia Oras

19. NEW POLICY FOCUS - switch to a low carbon economy; taxes targeting to climate change drivers
CHALLENGE FOR POLICY - reaching simultaneously climate change targets and other targets in socioeconomic spheres (economic growth and reduction of inequality)*. Impact of additional taxes.
TASK FOR STATISTICAL SYSTEM
1. Create the statistical infrastructure that would contribute in a positive way
2. Contribute to a respective communication mechanism
* - ISSUE eg PROBLEM - income growth is correlated with higher energy use and with higher pollution levels. Kuznetz curve seems not to work for the public „bad“ – climate change gases. Attaining of the decline in pollution would need additional mechanisms.
Monitoring of the ecological tax reform in Estonia; Kaia Oras

20. Policy Cycle: a simplified way of visualizing the policy management process *
Ecoinformatics International:
Monitoring of the ecological tax reform in Estonia; Kaia Oras

21. Policy implementation
Policy cycle and statistical systems role in monitoring of the ecological tax reform
Emissions and socioeconomic scenarios
Monitoring
Analysing of the options
Set up relevant statistical infrastructure: accounts, indicator systems
Impact analysis of diferent climate policies
Measuring of the outcomes
Dissemination of the results
Policy review
Agenda setting
Policy formation
Policy implementation
Monitoring of the ecological tax reform in Estonia; Kaia Oras

22. Next step: relevant statistical infrastructure
Organised meaningful multidimensional information system should:
- capture the relevant dimensions and complexity of the issue
- have a sufficient quality
- allow to perform impact analysis of various low carbon and
climate policies
- be accessible to users in order to make visibe the climate scenarios
effects on the targets at socioeconomic side
- be of use at different stages of the policy development and review
Monitoring of the ecological tax reform in Estonia; Kaia Oras

23. DATA, ACCOUNTS, INDICATORS
Next teps: relevant statistical infrastructure, how do we know?
COMMUNICATION
POLICY
RESEACH
KNOWLEDGE
DATA, ACCOUNTS, INDICATORS
Monitoring of the ecological tax reform in Estonia; Kaia Oras

24. Next steps: 1. Dimensions to be considered:
- impacts on households income
- resilience and risks (regarding several of the tax bases)
damage costs dimensions in order to justify environmental taxes
2. Collaborate with statistical community in order to learn from the best practices
3. Work on communication (main findings, visualize the outcomes but not only). Development of a technical solution (on line database)
Monitoring of the ecological tax reform in Estonia; Kaia Oras

25. Questions to the London Group
Should a framework for the monitoring of the green fiscal reforms cover additional aspects/dimensions?
Are there other assessments of the efficiency of the green fiscal reforms based on environmental accounts data available?
What kind of additional research is needed in order to develop better assessments? What could be the data needs for these possibly more developed assessments?
Should the consistency between the domains of environmental accounts be further developed?
Should statistical agencies carry out and disseminate these kind of analyses or is this a task for other dedicated agencies?
Is there a need for specific LG reseach theme dealing with the monitoring issues of green fiscal reforms?
Who would like to cooperate with us? Please send the suggestions to:
Monitoring of the ecological tax reform in Estonia; Kaia Oras

26. Thank you!
Monitoring of the ecological tax reform in Estonia; Kaia Oras

27. General: share of environmental taxes and charges in GDP
Monitoring of the ecological tax reform in Estonia; Kaia Oras

28. Influence on households
Environmental taxes form just around 2% of the final consumption expenditure of households, no major change in the share of environmental taxes in final consumption
The share of labour taxes in the income of householdsa (10%) did not change in this period either.
Monitoring of the ecological tax reform in Estonia; Kaia Oras

29. BASES FOR THE EVALUATION/ CONTENT Environmental effectiveness
DIMENSION/ASPECT
BASES FOR THE EVALUATION/ CONTENT
Environmental effectiveness
Changes in the absolute values of tax base (indicators: changes of waste landfill, emissions, relevant driving forces, resource use, etc.). Alternative: changes in the productivity, e g emissions or resource use per unit of value added.
Principle of revenue neutrality of an overall taxes
Balance between following components:
Sectoral level: changes in the share of the payments of social taxes in total expenses and changes of the share of environmental taxes in total expenses
State level: share of the environmental taxes in GDP compared to the share of the accrual from labour taxes in GDP (indicators: share of taxes in total expenses, share of labour taxes in total expenses) 
Competitiveness
Sectoral: comparison of profit with environmental taxes paid. (indicators: surplus compared with paid environmental taxes, monetary)
Equity of environmental taxes: who is carrying the burden of environmental taxes
Sectoral equity: sectors relative shares of paid taxes in comparison with the sectors relative shares in respective tax base (consumption, emissions etc.). Indicators: tax base in physical quantities, tax in monetary values)
Use of revenues
Public sector expenditures on environmental protection relative to the receipts of environmental taxes
Monitoring of the ecological tax reform in Estonia; Kaia Oras