Green Taxation – Encouraging Businesses to Contribute to Air Pollution Reduction

Green taxes, also known as environmental taxes, are the taxation imposed on energy, transport, and pollution of resources. They are introduced as an incentive for businesses to reduce their impact on the environment and to adopt more sustainable ways. Do you want to learn more about them? Then read this article!

Table of Contents

• What Is Green Taxation?
• Encouraging Businesses the Other Way Around
• Are Green Taxes Effective?
• The Takeaway

What Is Green Taxation?

Green tax, environmental tax, ecotax – you’ve probably heard at least one of these names. All of them refer to one thing: taxes on behaviours, products, and processes that are harmful to the environment.

The EU’s 2005 carbon tax is the perfect example. This particular green tax set a cap on the total number of carbon emissions allowed for businesses and imposed fees for going above it. Its aim was to achieve the EU’s sustainable development goals.

We should also mention here that green taxes play a secondary role apart from convincing businesses to switch to sustainable solutions – they generate revenue. The money from them is most frequently used to support other eco-friendly initiatives, so even if a business doesn’t try to improve its processes, the environment still benefits from such tax.

Encouraging Businesses the Other Way Around

A green tax strategy may also involve tax deductions and benefits for businesses that remain sustainable rather than penalise the ones that don’t. This can be done through various means, including:

• VAT reductions for eco-friendly products
• Lower fees and taxes for green shipping methods

Are Green Taxes Effective?

The final question that remains is whether such incentives do the trick, and here the case is a bit more…tricky. While, in general, green taxes do help reduce air pollution, there are situations when they do not, mostly due to the challenges that businesses face in evaluating their eco-friendliness and determining the right solutions. These challenges can involve numerous factors, such as:

• Lack of methodology to measure environmental impact
• Lack of affordable/accessible sustainable solutions
• Long transformation times (excessive time required to introduce more eco-friendly solutions)

The Takeaway

To sum it up, green taxes are simply taxes imposed on businesses that generate waste or pollution. They are there to encourage companies to look for sustainable alternatives. While, in general, this is effective, businesses often face challenges that prevent them from turning to more eco-friendly solutions right away, so this tax does not address all the problems. Nevertheless, it’s an effective strategy.

You may also read: How does air pollution affect global warming?