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13 October 2010
Solving the world’s environmental problems could take a significant toll on economic growth if only today’s technologies are available. We know that innovation – the creation and adoption of new technologies and know-how – provides a means to achieve local and global environmental goals at significantly lower costs. Innovation is also a major driver of economic growth.
OECD governments are increasingly using environmentally related taxes because they are typically one of the most effective policy tools available. Exploring the relationship between environmentally related taxation and innovation is critical to understanding the full impacts of this policy instrument – one potential facet of “green growth.” By putting a price on pollution, do environmentally related taxes spur innovation? What types of innovation result? Does the design of the tax play a critical role? What is the effect of this innovation?
In analysing these questions, this report draws on case studies that cover Japan, Korea, Spain, Sweden, Switzerland, the United Kingdom, Israel and others.
This report is a project of the OECD's Joint Meetings of Tax and Environment Experts, who work in concert with the Environment Directorate and the Centre for Tax Policy and Administration. This project also forms a part of the OECD's Green Growth Strategy.
Chapter 1. Introduction, Background and Main Findings
Chapter 2. Current Use of Environmentally Related Taxation
Chapter 3. Effectiveness of Environmentally Related Taxation on Innovation
Chapter 4. Tax Design Considerations and Other Tax-based Instruments
Chapter 5. A Guide to Environmentally Related Taxation for Policy Makers
- Annex A: Sweden's Charge on NOx Emissions
- Annex B: Water Pricing in Israel
- Annex C: Cross-country Fuel Taxes and Vehicle Emission Standards
- Annex D: Switzerland's Tax on Volatile Organic Compounds
- Annex E: R&D and Environmental Investments Tax Credits in Spain
- Annex F: Korea's Emission Trading System for NOx and SOx
- Annex G: UK Firms' Innovation Responses to Public Incentives: An Interview-based Approach
- Annex H: The UK's Climate Change Levy and Climate Change Agreements: An Econometric Approach
- Annex I: Japan's Tax on SOx Emissions
Multilingual versions & Executive Summaries
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OECD Work on Taxation and the Environment
In line with the increased importance attached to environmental issues, the OECD has scaled up its work on the nexus between tax policies and environmental policies; and with the Green Growth Strategy under preparation for the OECD Ministerial Meeting in May 2011, this process will continue in coming years. More information is available at www.oecd.org/env/taxes.