The Eighth Annual Global Conference on Environmental Taxation
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Workshop 2: Policy analysis: Country case studies of
environmental taxation in the transport sector

Using the Chinese tax system to achieve cleaner transportation

Bill Butcher, University of New South Wales, Sydney, Australia

China’s economic growth has brought unprecedented spending power to its rapidly growing middle class. Aspirational consumerism has led to a massive increase in the purchase and use of household appliances and motor vehicles, particularly in the more affluent cities and regions in the south and east of the country. In 2005, there were over 40 million private vehicles in China, not including motorcycles, with a growth rate of more than 10 per cent.

The Chinese government has adopted a range of fiscal and other instruments to meet the environmental dangers that are emerging from the country’s growing industrialization and affluence. These are achieving some success but have not been applied uniformly and the rules vary between cities and rural areas.

Part 1 of this paper examines the environmental situation in China, focusing on the impact of motor vehicles. Part 2 considers the taxes and other economic instruments imposed over three phases: acquisition, holding and usage. This will cover such aspects as VAT and excise taxes, new vehicle testing fees, usage taxes and tax incentives for alternative fuels. Part 3 contrasts the economic instruments prevailing in different regions of China and on different economic groups and critiques the reasons for these differences. Part 4 compares the Chinese approach with that taken in other countries and considers which other methods could prove effective in China. Part 5 concludes with an assessment of the current tax treatment of transportation, and makes suggestions for the way ahead.


The role of transport policy measures in the substitution between fuels
in the European Union

Prof. Santiago Álvarez, Prof. Desiderio Romero-Jordán, Prof. Marta Jorge García Inés, Spain

In the last two decades the environmental taxation has become a relevant instrument in environmental policy of the European Union. The European tax systems are characterized by an increasing presence of this figure. Although at supranational level the advances have been little. In this paper we explore the obstacles economic, social, fiscal and political which one faces. In addition, another key characteristic of this is the heterogenity. In fact, we observed from States Members that have implemented the so-called green tax reforms until those in which scarcely the "green argument" exists in the tax system. Thus, we analyse the causes of this situation. Moreover, this paper provides the factors to introduce this model of reform. In a future the role of environmental taxes will depend not only on the environmental, fiscal and commercial aspects integrated in the tax, but also of the intensity of the process of European integration.


Environmental Taxes on Passenger Cars
(EU Proposals and Allocation of Taxing Powers)

Prof. Pedro Manuel Herrera, Amparo Grau, Pablo Chico

Taxation of passenger cars and other road vehicles include no major environmental goals in many countries. However it could be a powerful instrument, not only to reduce CO2 emissions, but also to cope with air pollution (particularly in big cities), noise levels and traffic congestion. The issue is of vital interest because –as the EU Commission pointed out- “passenger cars are a major source of CO2 emissions and are, therefore, of particular relevance to the EU's environmental objective, namely to meet its environmental commitments under the Kyoto Protocol”.

New taxes could be designed taking into account potential emissions, according to technology, condition and use of vehicles. Nevertheless, this re-orientation of car taxes is more difficult because the taxing powers on vehicles are allocated among several levels of government. In the Spanish model, registration of cars is taxed at a federal level, consumption of fuel at both federal and regional level and property of cars at local level. Therefore co-ordination is necessary in order to achieve the environmental goals.

The European Commission has given a relevant step submitting a “Proposal of Directive on Passenger Car Related Taxes” (COM(2005) 261 final). As a matter of fact taxation of cars is partially harmonised by Council Directives 83/182/EEC and 83/183/EEC, but such rules are partial and insufficient. 

The proposal of the Commission was presented on 5.7.2005 and not much progress has been done: some member States are very reluctant to accept further harmonisation of car taxes. On the other hand, perhaps the proposal is not so ambitious regarding environmental goals as it could be. It seems to be primarily focused on problems related with the internal market, which do not always walk side by side with the environmental issues.

Our paper intends to analyse which measures should be taken in order to draft genuine environmental taxes on passenger cars (and some guidelines for road transportation in broader sense). We shall take the Spanish tax system (and the Spanish allocation of taxing powers) as an example to develop a comparative legal analysis. This overview will offer a solid bases to exam the commission proposal and to evaluate its pros and cons.

Taxation of cars is also a good working field to assess whether environmental and economic goals (the realisation of the internal market) may be pursued at the same time and through the same means, or whether the can collide and one have to give precedence to the other.


Relationship between the Kyoto mechanism and environmental taxation –
examples and possibilities for transport policy

Dr. Roland Geres, FutureCamp, Germany

Basing on a very short introduction into the current state of the Kyoto Mechanisms CDM and JI some examples will be presented. The project examples will focus the transport sector as well as the concepts of “project bundling” and “programme of activities” under the CDM that could build a framework for a combination of tax-similar incentives with the Kyoto Mechanisms. Furthermore the presentation looks into the concept of “Klimarappen” in Switzerland as an example for a policy-similar approach that enriches the discussions on the utilization of emissions trading in the transport sector. The examples will be used to draw some conclusions on a possibly harmonic relationship between “Ecotaxes” and the “Kyoto FlexMex”. Basing on that conclusions proposals for further possible regulation will be presented, aiming at the use of the strengths of both instruments.


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