The Green Fiscal Policy Network hosted the final plenary session of the 20th Global Conference on Environmental Taxation on Friday 27 September in Limassol, Cyprus. The session explored the equity dimension of green fiscal policies from different perspectives and some of the features required to build a politically and socially acceptable discourse on green fiscal reform. Panellists drew on the results of their research and experiences working in developed and developing countries across different sectors.

Approaching the subject from the angle of worker’s rights, Andreas Matsas, Secretary General of the Cyprus Workers’ Confederation (SEK), pointed out that there “are no jobs on a dead planet” and noted that the Cyprus Workers’ Confederation has communicated its support of green tax reform to the Ministry of Finance, recommending revenues go towards social protection and pension schemes. Moreover, he pointed out that the countries who implement carbon taxes within a wider policy package seem to gain real momentum in energy transition.

OECD’s Kurt van Dender, the Head of the Tax and Environment Unit, was also of the opinion that carbon taxes must be part of an integrated fiscal system to alleviate the political polarization between those supporting and those opposing the measure. In addition, he identified topics within revenue use that need further exploration: “forgotten revenue”, revenue neutrality and efficiency in designing rebates.

The need for intentionality in designing equitable environmental taxes was reiterated by Jaqueline Cottrell, Senior Policy Advisory at Green Budget Europe, who stressed that for these measures not to be regressive, they must quantify social benefits in scenario modelling and anchor its tax base on the luxury goods end—such as aviation. Further, Cottrel discussed the possibility of making an argument that environmental taxes are in fact inherently progressive as they address the climate crisis, whose impacts low-income citizens are most vulnerable to.

The Chair of the session, Professor Paul Ekins, the Director of Resources and Environmental Policy at UCL Institute for Sustainable Resources maintained that empirical data shows that carbon taxes have a higher probability of being progressive in developing countries (except for South Africa and Peru), nonetheless, he noted that some households are still strongly affected by carbon taxes, making compensation measures crucial.

Professor of Agricultural and Resource Economics, Yacov Tsur, from the Hebrew University of Jerusalem compared the set-up of energy consumption externalities of emissions and pollution with that of water, which is another public good and shared the differentiated water-pricing techniques for households and industries (using water as a production input) applied by Israel.

Some of the policy designs and concepts that generated much discussion among panelists included the notion of:

  • Earmarking although it was pointed out that there may be constitutional restraints to using it in some countries
  • Using rising block-rates as a water-pricing mechanism that has proved an effective policy tool in Israel
  • Lessons from fossil fuel subsidy reform which have shown the importance of the speed at which taxes increase and the communication supporting these measures.