Tuesday, October 30, 2007

Green taxes and well being

The use of economic policy instruments for the management of natural resources and environmental pollution is not a new concept. But its application in South Africa certainly is.

The idea is simple: Business as usual leads to overexploitation and pollution beyond the point of no-return. More targetted policy interventions are needed to correct for this (growing) imbalance.

Such interventions can take effect through (i) the market system (e.g. taxes, charges, subsidies), (ii) by creating new markets (e.g. defining property rights, by creating offset systems and by creating a market for tradeable permits such as the EU Emissions Trading Scheme), (iii) through regulations (e.g. bans, permits and quotas, zoning) or through (iv) participation and education.

The Mail & Guardian published a recent article on the topic of green taxes in South Africa:

Although the concept needs to be applauded the real test lies in the design of such taxes. And this design should not take place without evaluating the impacts of such taxes and the impacts of other kinds of interventions (as mentioned above) on criteria such as static and dynamic efficiency, distribution, rent seeking opportunities and development needs to name a few*. Environmental taxes certainly have a role to play, but DEAT as the responsible department should evaluate this in a broader package of other possible policy interventions as well.

* Sterner et al. 2003. Policy Instruments for Environmental and Natural Resource Management. RFF/World Bank/Sida.

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