New report: environmental fiscal reform potential in the EU

Environmental taxes have the potential to generate significant revenues for Member States and provide an important economic disincentive to polluters. As part of a consortium led by Eunomia Research & Consulting, along with ENT, Aarhus University and Denkstatt, IEEP has contributed to a study for DG Environment assessing the potential benefits associated with the increase of existing, and creation of new, environmental taxes in the context of environmental fiscal reform in the 28 EU countries.

It was estimated that the EU28 could raise €208 billion in additional revenue by 2030 through suggested reforms, equivalent to a 1.05% increase in GDP. The environmental benefits associated with reforms could amount to a value of €13.7 billion in 2030. Taking into account the political feasibility of reforms, tax revenues would be 59% lower in 2020, but only 9% lower in 2030. So, whilst reforms are challenging in the short term, almost all the suggested reforms were viewed as feasible over longer timescales. Earlier progress was expected particularly in the fields of landfill, product and transport taxes.

The report was presented by Eunomia and IEEP to the Expert Group on Greening the European Semester on 15 January 2016. Drawing on the report, it is expected that market-based instruments (MBIs) will become part of country specific recommendations in the European Semester.

During 2016 and 2017, IEEP will continue work on environmental tax reform by leading a European Commission project entitled "Capacity building, programmatic development and communication in the field of environmental taxation and budgetary reform". The project aims to contribute to a broader development and application of MBIs in the field of environmental policy and improve the knowledge base, stimulating exchanges of experience and best practice amongst stakeholders. It will focus on key environmental challenges, such as air pollution and health; water quality and availability; the circular economy; waste and resources; as well as biodiversity, sustainable land use, and marine litter.

For more information on IEEP’s work related to environmental tax reform, contact Patrick ten Brink or Emma Watkins.

Downloads