Tax in Environmental

Under the 2015 Paris Agreement, 197 countries agreed to try to keep global temperature rises "well below" 1.5 degrees celsius to avoid the worst impacts of climate change.  To achieve this, it is believed that net zero must be reached by 2050. 

Global net human-caused emissions of carbon dioxide (CO2) would need to fall by about 45 percent from 2010 levels by 2030, reaching ‘net zero’ around 2050. This means that any remaining emissions would need to be balanced by removing CO2 from the air.

Summary for Policymakers of IPCC Special Report on Global Warming of 1.5°C approved by governments

Net Zero refers to a state in which the greenhouse gases going into the atmosphere are balanced by their removal out of the atmosphere.

In early 2022, BDO’s Global Tax practice undertook research among its tax professionals regarding the “green taxes” policies in their jurisdictions, to make a clear and measurable assessment of global green tax policies and their effectiveness.

Each country was asked to provide details regarding areas such as: 

•  Firm commitments on net zero;  

• Specific areas in which green tax changes have been introduced;  

• Green-focused incentives, such as increased tax relief for research and development (R&D) and green investment; and  

• Whether a desire for behavioural change had been behind any of the tax policy changes. 

With responses from over 35 jurisdictions, our article assesses how environmental tax policies compare across countries and to determine which successful, already implemented policies our own governments could consider as we work internationally to build a strong, operational green tax agenda in our own jurisdictions.

We also investigate the balance between both the “polluter pays” and “incentives” models, and suggest that what is needed is a holistic approach that combines the two models.

Overall, the responses indicated that, although there is a broad global consensus in seeking to achieve net zero, there is a less than consistent approach in terms of tax policy. There are certainly common areas of focus, such as the use of “pollution” taxes, the move towards the use of electric vehicles and the effort to reduce plastic packaging by taxing single-use plastics. But the overall impression is of an unstructured, piecemeal approach in most economies.   

There is no easy answer, as there are wider implications to both the “polluter pays” and “incentives” models. What is needed, we suggest, is a holistic approach that combines the two.