Scaling Up Biodiversity‑Positive Incentives

4. Biodiversity-positive taxes and fees

Abstract

Biodiversity-positive taxes and fees help internalise environmental costs to incentivise conservation and sustainable resource use. This chapter illustrates how these instruments have been used across countries and sectors to address pressures such as pollution and overexploitation of natural resources, and to fund biodiversity’s protection. It highlights key lessons, such as the importance of strengthening the knowledge base through ex-ante impact assessments, engaging stakeholders early in the policy process to enhance buy-in, and monitoring, enforcement and periodic evaluations to adapt and refine taxes and fees to ensure their long-term effectiveness.

Key messages: Scaling up and increasing the effectiveness of biodiversity-positive taxes and fees

• Biodiversity-positive taxes and fees integrate biodiversity values in economic decision making. They apply the polluter pays principle and, in cases such as protected area entrance fees, the beneficiary pays principle. By helping internalise environmental costs, taxes and fees encourage producers and consumers to conserve and sustainably use biodiversity.

• Biodiversity-positive taxes and fees are implemented across various sectors and countries, with a growing number of instruments targeting biodiversity pressures, such as pollution and unsustainable natural resource use. Despite the growth seen until 2015, there remains significant potential to expand their use and improve their effectiveness.

• Lessons from existing biodiversity-positive taxes and fees highlight good practices for increasing their use and effectiveness:

  • Developing or strengthening the knowledge base supports effective policy design. Ex-ante appraisals, including assessments of environmental and economic impacts, help tailor instruments to specific contexts.

  • Targeting biodiversity-related taxes is essential to maximise environmental effectiveness while ensuring administrative feasibility. Well-designed targeting can also help minimise unintended consequences, such as substitution effects or disproportionate burdens on specific groups.

  • Engaging stakeholders early in the policy process enhances acceptance and implementation. Consultation with affected sectors, local communities and other stakeholders can improve policy design, address concerns and support compliance.

  • Gradual implementation, with periodic review and adjustment, allows for flexibility and continuous improvement. Starting with moderate rates and scaling up over time can help manage socio-economic impacts while enabling policy learning. However, political economy constraints may make future adjustments challenging, reinforcing the importance of sound initial design to ensure long-term policy effectiveness.

  • Earmarking revenue from biodiversity-related taxes and fees can contribute to biodiversity financing. It can also strengthen public support and improve environmental outcomes. While earmarking has its merits, it should be applied prudently to reduce inefficiency.

  • The potential socio-economic impacts of biodiversity-positive taxes and fees should be assessed through robust analysis, with targeted measures to address any burdens. Recycling revenues, offering support for sustainable alternatives, and investing in complementary initiatives can enhance policy effectiveness and public acceptance.

  • Continuous monitoring, enforcement and regular evaluation improve the effectiveness of biodiversity-positive taxes and fees. Data collection, compliance checks and periodic reviews provide the information needed to adjust policies and maintain their relevance.

This chapter examines the role of biodiversity-positive taxes and fees in supporting biodiversity. It begins by outlining the economic rationale for using taxes and fees to internalise environmental costs and influence behaviour. The chapter then focuses on opportunities to scale up biodiversity-positive taxes and fees, drawing on lessons from existing instruments in different sectors and countries. It highlights key considerations and good practices for effective policy design, including stakeholder engagement, gradual implementation, revenue earmarking and continuous monitoring.

4.1. Introduction: Environmental taxes and fees and their economic rationale

Environmental taxes and fees are economic instruments designed to modify economic behaviour through financial disincentives, thereby aligning private actions (e.g. of households and corporates) with public environmental goals. As with all taxes and fees, they also generate revenues for government budget. Biodiversity-positive taxes can be described as “any compulsory, unrequited payment to general government levied on tax bases deemed to be of particular relevance to biodiversity” (i.e. taxes that have a tax base with a proven and specific negative impact on biodiversity) (OECD, 2013[1]). Taxes are “unrequited” because the taxpayer does not receive a direct or specific benefit in return that is proportionate to the payment.

In environmental economics, the theoretical rationale of these tools is to internalise negative externalities. Private economic activities can have social costs that are not reflected in market prices (i.e. negative externalities). Putting a tax on activities that harm biodiversity and ecosystem services, such as pollution and the over-exploitation of natural resources, internalises these costs in private sector decision making, incentivising biodiversity-positive behaviours (Deke, 2008[2]). Biodiversity-positive taxes are therefore based on the polluter pays principle (PPP), which stipulates that the costs associated with environmental loss prevention, control, and remediation should be borne by the polluter rather than society at large (OECD, 2008[3]).

Biodiversity-positive fees (charges1) are similar to taxes. However, unlike taxes, a fee is a requited payment to a national or local government, which means the payer receives a specific service, benefit or privilege in return that is proportional to the payment. For example, an individual or business may pay to enter protected areas or to obtain a license for natural resource extraction.

Fees may be consistent with the PPP or the beneficiary (user) pays approach (Coffey and Newcombe, 2000[4]) (Sanchez Trancon and Leflaive, 2024[5]). The beneficiary pays approach assigns the costs of maintaining or enhancing ecosystem services to the individuals or entities that directly benefit from them (OECD, 2008[3]). For example, a water pollution fee is aligned with the PPP, while a protected area entrance fee that raises revenues from visitors who benefit from the park is based on a beneficiary pays approach. Charges on water uses may align with PPP or the beneficiary pays approach depending on how the instrument is targeted (Sanchez Trancon and Leflaive, 2024[5]).

Examples of taxes and fees that provide incentives to conserve and sustainably use biodiversity include taxes on potential pollutants such as pesticides, fertilisers, and wastewater discharge, and taxes on resource use such as timber, groundwater extraction, wild flora and fauna. Examples of fees include those on fishing and hunting licenses, and entrance fees to access national parks.

Properly designed taxes and fees can induce significant behavioural changes that lead to environmental improvements (Battaglini and Coate, 2008[6]). For instance, a tax on pesticide use can incentivise farmers to reduce their reliance on harmful chemicals and adopt more eco-friendly farming methods (Finger et al., 2017[7]; Nielsen et al., 2023[8]). Similarly, entrance fees to protected areas can help manage tourism numbers at parks and promote responsible tourism, while generating funds for the maintenance and protection of these areas (Adetola, 2023[9]; Gális, 2022[10]).

The effectiveness of these instruments in driving behavioural change hinges on their design – for example, tax rates must be set high enough to promote behavioural change but balanced to avoid excessive economic burden and unfair distribution of costs. Furthermore, taxes and charges alone may not be enough to meet environmental objectives and require complementary policy measures (Leflaive, 2024[11]). Ultimately, when well designed and implemented, fiscal instruments can help align economic incentives with environmental sustainability, leading to long-term positive impacts on biodiversity and ecosystem health (Schuster et al., 2017[12]).

Moreover, by changing the relative costs of activities and products, positive incentives can help shift harmful financial flows and increase investment in biodiversity. They, therefore, help to reduce the biodiversity finance gap, reducing the pressure on government budgets to take remedial action associated with biodiversity and ecosystem service loss. Taxes can also stimulate investment in research and development (R&D) and innovation as companies seek cost-effective solutions for minimising their tax burden (OECD, 2010[13]).

4.2. Current use of biodiversity-positive taxes and fees

According to the OECD Policy Instruments on Environment (PINE) database, globally there are 227 active taxes and 301 active fees that are relevant to biodiversity (Section 1.1.1). The number of countries implementing such taxes and fees has markedly risen since 1980 but has been relatively constant since 2015.

Looking more closely across these incentives illustrates the diverse possible uses for taxes and fees in addressing pressure on biodiversity. Biodiversity-related taxes and fees typically target either pollution or natural resource use. This section provides an overview of how countries are deploying these instruments in these two areas.

4.2.1. Taxes and fees on pollution

Biodiversity-positive taxes and fees on pollution include taxes on pollution from pesticides and fertilisers; water pollution taxes and fees; and plastic bag taxes. Agricultural pollution taxes can be applied to decrease the use of polluting products or limit their emissions (OECD, 2020[14]). They typically target fertilisers and pesticides, which can pollute air and waterways, posing a threat to biodiversity (and human health) (Dudley and Alexander, 2017[15]). Reflecting the social cost of these inputs in their prices by applying a tax can, in theory, help to address this. However, the effectiveness of such measures has been mixed, due to both the design of the policies and the response functions of producers (OECD, 2020[14]).

While pesticide taxes can form an important component of an integrated pesticide policy (Finger et al., 2017[7]), they have not been widely adopted by countries. Countries with pesticide taxes include Sweden, Denmark, France, Italy, Mexico and Norway (Sud, 2020[16]). Pesticide taxes can be used to mitigate the negative impacts of farming practices on biodiversity (Blagoeva and Vanya, 2023[17]; Finger et al., 2017[7]). While these taxes often aim to reduce pesticide use and associated environmental risks, biodiversity protection is not always an explicit policy objective. In many cases, the focus is on broader environmental or human health outcomes, with biodiversity benefits considered indirect co-benefits. Moreover, the effectiveness of pesticide taxes in achieving biodiversity outcomes is rarely assessed through systematic monitoring, as evaluations typically focus on changes in pesticide sales or usage rather than direct ecological indicators (OECD, 2020[14]).

Sweden introduced the world's first flat-rate pesticide tax in 1984, initially targeting residues in surface water and food. The tax has evolved to address broader environmental risks associated with pesticide use and currently the tax applies to all plant protection products in the form of a uniform monetary amount per kilogram of active substance (Gawel, Hagemann and Purkus, 2021[18]). Denmark first introduced a VAT of 3% on all pesticides in 1987. The purpose of this initial tax was to reduce human health impacts, to raise revenue to strengthen research at public research institutes and farmers' extension services, to reach a target of a 50% reduction in pesticide use by 1997 (Sud, 2020[16]).

In France, a volume tax on pesticides was introduced in 2000, initially as the general tax on polluting activities (taxe générale sur les activités pollutants - TGAP), with seven taxation categories based on eco-toxicological and toxicological properties. This was replaced by a fee on non-point agricultural pollution in 2009 with three categories based on environmental and health risks (Bjørnåvold et al., 2022[19]). Mexico introduced a pesticides tax in 2014 (together with a tax on CO₂) with two primary goals: first, to lower pollution levels, and second, to boost tax revenues allocated to the general budget (Pérez and Vence, 2021[20]). The tax is levied on the production, import, and sale of pesticides (Camara De Diputados del H. Congreso De la Union, Mexico, 2021[21]) and is applied according to the category of acute toxicity hazard to humans.

Few examples exist of specific fertiliser taxes or fees that directly target the biodiversity impacts of fertiliser use at the farm level. More commonly, fertilisers are subject to Value-Added Tax (VAT), and in some cases, they may even enjoy tax exemptions (e.g. France, India, Ireland, Italy, and the US). Among the few relevant examples, the EU Carbon Border Adjustment Mechanism (CBAM), in effect since October 2023, applies to fertiliser imports based on their embedded greenhouse gas emissions at the production stage rather than their downstream environmental impact from application (European Union, 2023[22]). A tax that directly addresses the biodiversity impacts of fertiliser over-application – such as nutrient runoff affecting water bodies – would need to be implemented at the farm level, but such measures remain rare. From 2026, EU importers will need to purchase CBAM certificates based on these emissions, effectively applying a carbon price aligned with the EU Emissions Trading System (ETS) and adjusted for any carbon costs already paid in the country of origin. This aims to promote fair competition and cleaner production globally. Both imported and domestic fertilisers in the EU will face carbon pricing – imports through CBAM certificates and domestic production via the EU ETS. The cost will depend on the emissions linked to fertiliser production, with adjustments to prevent double carbon charges where applicable (European Union, 2023[22]).

Water effluent fees and taxes have been implemented across a range of countries to safeguard water resources and enhance water quality. Examples include Australia, Canada, Korea, Lithuania, Malta, Mexico, the Netherlands and Poland (OECD, 2024[23]). The Netherlands established a water pollution tax in 1971, targeting industries and households to curtail pollutant discharges into waterways. The tax applies to all direct and indirect discharges into surface waters, covering sewage treatment costs. For industrial dischargers, the tax is based on the pollutant load (e.g. organic matter, nitrogen), while for households and municipalities, it is typically calculated per population equivalent (PE), which reflects the estimated treatment cost per person (OECD, 2014[24]). As part of the broader water pollution tax introduced in 1971, a separate levy was applied to heavy metals and salts discharged directly into surface waters. This component was abolished in July 2014. On the other hand, there was a rate increase for the pollution levy for national waters, which took effect in January 2015 (Ministry of Infrastructure and Water Management, 2024[25]). The tax is complemented by a municipal fee that helps cover sewer network costs.

Australia introduced a water effluent charge in 1993, which they revised in 2008. The fee is levied on industries that discharge pollutants into water bodies, encouraging them to reduce their wastewater emissions (Radcliffe, 2022[26]). More recently, China introduced a broad Environmental Protection Tax in 2018. The new law taxes 117 major pollutants in four categories: water pollutants, air pollutants, solid wastes and noise nationwide. The Environmental Protection Tax replaced an earlier pollution discharge fee from the 1980s, which was considered to be ineffective due primarily to low fee rates and lax enforcement (Zhang, Xia and Zhang, 2023[27]).

Taxes or levies on plastic bags is one area where recent years have witnessed a large uptake in national, and in some cases also subnational, policy (Table 4.1). Growing awareness of pollution (marine pollution in particular), is one of the cited reasons driving government policy in this area, with several countries worldwide adopting either bans or taxes on plastic bags (Nielsen, Holmberg and Stripple, 2019[28]). Some of the first plastic carrier bag levies were introduced in Northern Europe, where many grocery stores in countries such as Sweden (1970s), Germany (1991) and Denmark (1994) gradually implemented charges for plastic bags. In Denmark for example the 1994 tax was indirect, placed at import or manufacturing level based on weight. Retailers were encouraged, but not required, to pass the cost on to consumers. Taxes on single-use plastics can be highly effective in reducing plastic bag consumption, particularly when well-designed and consistently applied (OECD, 2020[29]) (Box 4.1).

Table 4.1. Plastic bag levies across various countries

	Year of introduction	Rate / bag (local currency)	Rate / bag (USD)	Notes
Bulgaria	2011	0.55 BGN	0.38 USD	Plastic bags less than 25-micron thickness banned since 2022.
Cambodia	2018	400 KHR	0.10 USD
Colombia	2017	50 COP	0.13 USD	For thick bags (with a ban on thin bags). Scheduled to be replaced by a ban from 2024
Cyprus1	2018	0.05 EUR	0.06 USD
Denmark	1994; 2021	Increased to 4 DKK in 2021	0.66 USD	Applies to both plastic and paper bags with handles.
England	2015; 2021	0.05 GBP; Increased to 0.1 GBP in 2021	0.14 USD
Greece	2018	0.09 EUR	0.11 USD
Ireland	2002; 2007	0.15 EUR in 2002; increased to 0.22 in 2007	0.20 USD
Israel	2017	0.1 ILS	0.03 USD
Malta	2009	0.15 EUR	0.21 USD
Poland	2019	0.25 PLN including VAT	0.07 USD
Portugal	2015	0.10 EUR including VAT	0.12 USD	Scheduled to start levying 0.04 EUR / very light plastic bag in 2024.
Sweden	2020	0.3 SEK for small plastic bags (volume under 7L and thickness under 15 µm)	0.03 USD	Tax later abolished on Nov 1, 2024.
Türkiye	2019	0.385 TRY	0.07 USD

1. Note by the Republic of Türkiye

The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Türkiye recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Türkiye shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union.

Source: Updated from (Nielsen, Holmberg and Stripple, 2019[28]), “Need a bag? A review of public policies on plastic carrier bags – Where, how and to what effect?”, http://dx.doi.org/10.1016/j.wasman.2019.02.025.

Box 4.1. The impact of plastic bag taxes

While the design of biodiversity-positive taxes and fees can vary based on the targeted activity or product, their effectiveness is often demonstrated through measurable changes in consumption patterns and environmental outcomes. This is evident in the case of plastic bag taxes implemented across several countries, which have led to significant reductions in plastic bag usage. In Portugal, following the introduction of the single-use plastic bag tax in 2015, consumption fell by 74%. This was also accompanied by a 61% increase of reusable plastic bags. According to the Swedish Environmental Protection Agency (EPA), in 2022, Swedes were buying 17 plastic bags per person per year, compared with 74 in 2019, the year before the tax was introduced. In Cyprus1, the plastic bag fee introduced in 2018 led to a reduction in the usage of single-use plastic bags, with a decline in plastic bag consumption by over 80% since its inception (equivalent to 140 000 – 380 000 plastic carrier bag per month). In Demark, the tax introduced in 2021 applies to both plastic and paper bags.

Further evidence of the potential effectiveness of taxes and fees on reducing demand for plastic bags, comes from city-level initiatives. Based on a study concluded in 2018 on the application of plastic checkout bags in the City of Chicago, the tax reduced consumer use of disposable bags from 82% to 54%, while doubling reusable bag use from 13% to 29% – a change that occurred within the first month of the tax and had persisted a year after the tax implementation.

1. Note by the Republic of Türkiye

The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island. Türkiye recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Türkiye shall preserve its position concerning the “Cyprus issue”.

Note by all the European Union Member States of the OECD and the European Union

The Republic of Cyprus is recognised by all members of the United Nations with the exception of Türkiye. The information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.

Source: (European Commission, 2021[30]), Ensuring that polluters pay: Cyprus. Implementation of the plastic bag fee, https://environment.ec.europa.eu/system/files/2021-10/Cyprus.pdf; (Homonoff et al., 2018[31]), Skipping the Bag: Assessing the Impact of Chicago’s Tax on Disposable Bags, https://www.ideas42.org/wp-content/uploads/2018/09/Bag_Tax_Paper_final.pdf; (Martinho, Balaia and Pires, 2017[32]), The Portuguese plastic carrier bag tax: The effects on consumers’ behavior; https://doi.org/10.1016/j.wasman.2017.01.023; (Naturvårdsverket, 2023[33]), Naturvårdsverket, Sweden Environmental Agency, https://www.naturvardsverket.se/om-oss/aktuellt/nyheter-och-pressmeddelanden/2023/maj/17-plastbarkassar-per-person-forbrukade-vi-i-sverige-under-2022/.

Similar policies have also been introduced at the sub-national level in various countries. For example, to curb disposable bag use, the City of Chicago implemented a USD 0.07 fee on all paper and plastic checkout bags in 2017. Most recently, in British Colombia (BC), Canada, under the Single Use and Plastic Waste Prevention Regulation effective as of July 2024, BC must charge at least CAD 2 for each new reusable shopping bag and CAD 0.25 for each new recycled paper bag. Single-use plastic shopping bags have been banned since December 2023. However, while plastic bag taxes and bans can significantly reduce single-use plastic consumption, they also raise concerns about material substitution. If alternative materials, such as paper or thicker plastic bags, are not properly regulated then material substitution may lead to unintended environmental consequences, such as higher resource use and waste generation. The OECD has highlighted that for these measures to be effective in the long term, they should be part of a broader strategy that promotes genuinely sustainable alternatives and considers the full lifecycle impacts of different materials (OECD, 2020[29]).

4.2.2. Taxes and fees on natural resources

Entrance fees for protected areas are common globally and have been applied to both terrestrial and marine protected areas across many countries. Protected area entrance fee data are available for more than 50 countries, but the overall number of countries with protected area entrance fees is likely to be higher (Van Zyl, Kinghorn and Lucy, 2019[34]).

Entrance fees are often motivated by a need to fund management activities in natural areas, and in some cases to manage the impacts of tourists on fragile ecosystems. Indonesia, for instance, charges entrance fees to access its national parks, including the renowned Komodo National Park. These fees support the maintenance and protection of biodiversity within these parks, helping to preserve the unique flora and fauna for future generations (Firmansyah et al., 2023[35]). Similarly, Botswana implements entrance fees for its national parks, such as Chobe National Park and the Okavango Delta (Box 4.2).

Box 4.2. Revised protected area fees in Botswana

With about 40% of land designated as national parks and game reserves, ensuring sustainable financing of protected areas is a key priority in Botswana. Financing of protected areas has long been considered insufficient. To address this, Botswana’s National Biodiversity Finance Plan (2019), developed with UNDP BIOFIN, proposed reviewing and increasing protected area entrance fees, while increasing the revenue retained for protected area management and investment. While already an important source of revenue, protected area entrance fees in Botswana have remained unchanged for 20 years, resulting in a loss of potential revenue. Following broad stakeholder consultations, the government approved the implementation of new fees to come into effect in April 2022. In just one year (April 2022-April 2023), the new fees brought in USD 7.8 million. By comparison, protected area entrance fees in 2018 were about USD 2.6 million.

Source: (BIOFIN, 2024[36]), Botswana’s new protected area fees generate US$ 7.8 million, more than projected | BIOFIN; (Van Zyl et al., 2019[37]), Botswana Protected Areas Review of Entrance and Other Fees, http://dx.doi.org/10.13140/RG.2.2.27421.54245.

Forestry taxes and fees can help protect forest ecosystems and promote sustainable forest management (Cubbage, Harou and Sills, 2007[38]). In Slovakia, for example, levies have been placed on the removal of land from forest. While forest owners are required to manage forests for their defined function (e.g. production or protection), district authorities may grant exemptions in exchange for a fee. The fee aims to incentivise maintenance and sustainable management of forests, and to generate revenue for the state budget. In 2021, fees for the removal for forest land amounted to EUR 1.22 million (OECD, 2024[39]). Austria has implemented a fee for tree protection in Vienna as part of its broader environmental tax policy (Schweitzer and Bonduel, 2016[40]). This levy is imposed on activities potentially harmful to trees and forest ecosystems. In Costa Rica, the General Forest Tax (Impuesto General Forestal) established under Forest Law No. 7575, imposes a 3% tax on the market transfer value of timber. Administered by the Ministry of Environment and Energy (MINAE) and the National Forest Financing Fund (FONAFIFO), this tax supports sustainable forest management and conservation initiatives (Hartley Ballestero, 2021[41]). In Poland and Hungary, fees are based on the amount and type of tree felled. From an internalisation perspective, this design is arguably more appropriate than one based solely on wood sales income, as it is more directly linked to the actual impact on the forest (Mottershead et al., 2021[42]). In Europe, forestry fees and charges are also in place in Lithuania, Croatia, Czechia, and Bosnia and Herzegovina (Mottershead et al., 2021[42]). In South America, Colombia provides an example of a timber tax (see Box 4.4 in Section 4.3). For instance, forest charges are levied on wood income, with different rates often applied to private and public forestry companies.

Concerning the fishery sector, fishing fees can advance sustainable fishing practices, benefiting marine and freshwater biodiversity. They often associated to fishing permits, quotas, and access rights, but most often are used for regulating fishing efforts and funding fisheries management and conservation initiatives. For example, Norway introduced a fisher boat registration tax applicable to all registered fishing vessels in the country. Fishing license fees are also operational in the UK. In the financial year 1 April 2022-31 March, 2023, a total of 903 216 fishing licenses were sold, generating revenue of GBP 20.9 million (UK Environment Agency, 2024[43]).

Indonesia introduced a national fisheries tax scheme (Penerimaan Negara Bukan Pajak Perikanan [PNBP]) in 1997. The national fisheries tax system consists of Fisheries Production Tax and Fisheries Business Tax. The Production tax is charged to fishing entities based on the scale of fishing activities (i.e. production capacity, benchmark fish prices, and vessel size), while the Business Tax is charged based on the type of fishing gear and vessel size. Each of the two tax instruments has its own objectives, both works in a similar way in terms of limiting the number of large fishing vessels in Indonesian waters. For example, all entities must pay PPP to obtain a Fishery Business License to conduct a fishing business or to obtain a Fish Transportation Vessel (Muawanah et al., 2018[44]). Similarly, PHP is levied on fishing entities when they apply for a fishing permit, which is required to catch fish in Indonesia’s Fisheries Management Areas (FMAs) (Halimatussadiah et al., 2023[45]). In 2019, government revenue from the fisheries sector was relatively low compared to other natural resource sectors in Indonesia. Fishery tax revenue reached only 0.13% of total natural resource sectoral tax revenue (Halimatussadiah et al., 2023[45]).

Access fees for foreign fishing vessels are another type of fee that can be used to regulate pressure on marine resources (Scholaert, 2024[46]). While such fees generate government revenue and may contribute to resource management, fishing effort is typically controlled through other regulatory mechanisms, such as quotas, gear restrictions, and seasonal closures, rather than through taxation or fees alone (OECD, 2017[47]).

Another type of levy is a fish bycatch levy, which has been applied in Namibia. The levy charges bycatch per tonne and is set on a species basis. The levies are applied to prevent fishers from targeting species for which they do not have a quota. In 2012/3, more than USD 400 000 (NAD 6 000 000) was levied in bycatch fees, representing 4.5% of total government revenues from fisheries that year (Booth et al., 2021[48]). Additional revenue is also derived from vessel and fishing rights licenses that must be obtained to fish in Namibian waters.

Water abstraction charges are used to reduce the demand for water and are typically set at the river basin or aquifer level. Similar charges could be applied to other significant uses of water bodies – such as the construction of obstacles, navigation, or sediment extraction – which can also impact ecological flows and aquatic ecosystems but remain underutilised as policy tools (Farnault and X. Leflaive, 2024[49]). Surface and groundwater overexploitation not only results in aquifer depletion and water-quality degradation but also impacts the ecological integrity of streams and wetlands and results in significant losses of habitat and species (Gruère, Ashley and Cadilhon, 2018[50]). In theory, these charges are intended to reflect both the opportunity cost and the environmental cost of water use, consistent with the cost recovery principle under the EU Water Framework Directive. However, revenues generated from water charges can be quite small (Farnault and X. Leflaive, 2024[49]). Countries with water abstraction charges include Canada, Estonia, France, Germany, Hungary, Japan, Korea, Lithuania, Montenegro, Romania and the UK (see also the toolkit on water from (OECD, 2021[51])).

In Estonia, the water abstraction charge applies to most commercial and municipal water users, but exemptions are in place for specific sectors. The water abstraction charge is not required if the water is abstracted for hydroelectric power generation, irrigation of agricultural land (including greenhouses), or for fish farming purposes. The rates are set by the government, depending on the water source and use, ranging from EUR 1.55 (minimum rate for surface water as cooling water) to EUR 2 300.81 (for mineral water used for drinking) per 1 000 cubic meters (Table 4.2). Higher rates apply for deep water abstractions. Abstracting water from deeper surfaces can indeed have more consequences for the environment, as the deeper it is, the lengthier aquifer recharge may be. Slow or limited aquifer recharge, in turn, can have important consequences for river flows in the summer, for soil and eventually for desertification phenomena (Sanchez Trancon and Leflaive, 2024[5]).

Table 4.2. Minimum and maximum rates of water abstraction charges in Estonia

Water Source/Use	Minimum Rate (EUR/1000 m³)	Maximum Rate (EUR/1000 m³)
Surface water	14.65	38.34
Surface water as cooling water	1.55	7.66
Water from the Quaternary period aquifer	30.65	70.30
Water from Devonian to Ordovician-Cambrian aquifers	40.90	95.86
Water from Cambrian-Vendian period aquifers	44.70	102.25
Potable quality water from Cambrian-Vendian aquifers for technological purposes (excluding food production)	82.40	191.7
Mineral water used for drinking	1469	2300.81
Mineral water for therapeutic baths	146.90	230.08
Water pumped out of quarries	9.58	63.91
Water pumped out of mines	25.56	77.84

Note: Rates are in EUR per 1 000 cubic meters.

Source: (Riigikogu, 2014[52]) “Water abstraction charge” in Environmental Charges Act, Riigikogu, Estonia, Environmental Charges Act–Riigi Teataja.

France has a tax (redevances pour prélèvement sur la ressource en eau, art. L231-10-9) that applies to all abstraction activities, except for withdrawals of seawater, water extraction from ceased mining activities, water used for underground works, drainage to keep buildings dry, and water used for aquaculture, geothermal energy, and frost control for perennial crops. Where a person has a borehole for their water supply, they are required to install a metering device that measures the volume of water abstracted. Exemptions also apply to withdrawals outside the low water period or when the water is exclusively used to supply heritage fountains in mountain areas, up to a maximum of 5 000 m³. Rates are differentiated according to the intended use, are highest for drinking water supply and lowest for gravity-based irrigation (Sanchez Trancon and Leflaive, 2024[5]). The rates are variable, depending on the water usage and the specific water basin and are determined by water agencies in EUR/m³ within national limits (Table 4.3).

Table 4.3. National limits on water abstraction charge by water uses in France

Water Uses	Category 1 (EUR/m³)	Category 2 (EUR/m³)
Irrigation (except gravity irrigation)	3.6	7.2
Gravity irrigation	0.5	1.0
Drinking water supply	7.2	14.4
Industrial cooling leading to a return of more than 99%	0.5	1.0
Feeding a channel	0.03	0.06
Other economic uses	5.4	10.8

Note: Water resources of each basin are classified in category 1 when they are located outside the water distribution zones defined in the law and in category 2 otherwise.

Source: (OECD, 2023[53]) ‘’National limits on water abstraction charge according to water uses (France)’’ in Environmental Tax Policy Review of Andalusia, https://doi.org/10.1787/fe6d8b45-en.

In Germany, the water abstraction charge in Baden-Württemberg is regulated by the region's Water Act, amended in 2010. This charge aims to raise awareness of water scarcity and promote water-saving behaviours. The tax is levied on the annual volume of water abstracted, with rates varying by water source and extraction type, ranging from EUR 0.01/m³ to EUR 0.051/m³ (Table 4.4). Exemptions and reductions are available for minor uses, certain industries, and specific investments in environmental management or pollution reduction (Sanchez Trancon and Leflaive, 2024[5]). The charge has successfully reduced water abstraction by 34% between 1987 and 2007 (Möller-Gulland, Lago and Anzaldua, 2015[54]).

Table 4.4. Water abstraction tax rate in Baden-Württemberg (Germany)

Sources	Cost Categories	Tax Rates (EUR/m³)
Surface water	Public water supply	0.051
Surface water	Others	0.010
Ground water	Public water supply	0.051
Ground water	Others	0.051

Source: (OECD, 2023[53]) ‘’Tax rates (Baden-Württemberg Germany)’’ in Environmental Tax Policy Review of Andalusia, https://doi.org/10.1787/fe6d8b45-en.

4.3. Increasing the scale and effectiveness of biodiversity-positive taxes and fees

Policy makers are under increasing pressure to address biodiversity loss. The importance of biodiversity-positive economic incentives is underscored in international agreements such as the Convention on Biological Diversity's Strategic Plan 2011-2020 and its successor, the Kunming-Montreal Global Biodiversity Framework (Chapter 2). Unlike more traditional taxes, such as those on income, whose primary purpose is aimed at revenue generation and redistribution purposes, biodiversity-positive taxes and fees are a key tool to integrate biodiversity considerations into economic decision-making.

The role of taxes and fees for biodiversity is recognised at the European level. For example, the EU Biodiversity Strategy for 2030 (European Commission, 2020[55]) states that the European Commission will “further promote tax systems and pricing that reflect environmental costs, including biodiversity loss. This should encourage changes in national fiscal systems to shift the tax burden from labour to pollution, under-priced resources, and other environmental externalities. The ‘user pays’ and ‘polluter pays’ principles have to be applied to prevent and correct environmental degradation” (European Commission, 2020[55]). In its 2020 Farm to Fork Strategy, the EU Commission announced that it will take action to reduce the risk of chemical pesticides and more hazardous pesticides by 50% in 2030 and further stated that “EU tax systems should also aim to ensure that the price of different foods reflects their real costs in terms of use of finite natural resources, pollution, GHG emissions and other environmental externalities” (European Commission, 2020[56]). However, progress on implementing these commitments has faced significant setbacks. In 2023, the European Parliament rejected a key proposal to cut pesticide use, and in early 2024, European Commission President Ursula von der Leyen announced plans to withdraw the contested pesticide regulation following strong opposition from agricultural sectors (Euractiv, 2024[57]; Politico, 2023[58]).

Despite the proliferation of biodiversity-positive taxes and fees between 1980 and 2010, both in terms of the number of countries that adopted these as well as the number of instruments overall, the data available suggest that the uptake of biodiversity-positive taxes has not been as strong as it could have been in recent years (Chapter 2). Biodiversity-positive taxes and fees still have significant potential to be scaled up to address the pressures on biodiversity loss. Drawing on case studies, this section provides insights into how the use and coverage of these instruments can be increased.

4.3.1. Develop or strengthen knowledge base for setting biodiversity-positive taxes and fees

Prior to introducing or reforming a tax or a fee, ex-ante appraisals can be used to estimate the likely environmental and economic impacts based on previously observed data such as on price elasticities of demand (e.g. for plastic bags, water across different sectors), willingness to pay (e.g. to visit a national park or pay a tourism fee) and abatement costs.

Overall, the recent literature on empirical evaluation of the impacts of carbon prices is far larger than on pollution and natural resources issues that are more closely linked to biodiversity. This is a hindrance as the adoption of new types of policies can spill-over to other countries as new evidence on their effectiveness becomes available. Concerning fees on pollution, plastic bag levies provide an example of how environmental impacts and policy effectiveness can be assessed through empirical studies. Various studies have been undertaken to examine the effectiveness of plastic bag levies in reducing consumption. For example, following the implementation of a single-use plastic bag levy in Ireland in 2002, consumption fell by more than 90% (Convery, McDonnell and Ferreira, 2007[59]). Following a small increase in plastic bag consumption in 2006, the tax was raised to EUR 0.22 in 2007, which led to another decline in consumption (Watkins, 2022[60]).

4.3.2. Targeting taxes to balance environmental effectiveness and administrative costs

Governments must seek a balance between environmental effectiveness and efficiency of a tax or fee, considering both its design and administrative complexity. Ideally, taxes and fees should be targeted closely to the pollutant or polluting/resource-consuming behaviour, reflecting the full scope of environmental damages and accounting for variations in environmental risk (OECD, 2020[14]). As the impact on biodiversity of a given level of pollution or natural resource use depends on the ecological sensitivity of the receiving environment (Kumar et al., 2023[61]), fiscal instruments should, where feasible, also account for spatial variations. In 2021, Mexico’s tariff system for the use or exploitation of forests and Protected Natural Areas (PNAs) was reformed to incorporate differential tariff systems based on ecosystem vulnerability and carrying capacity – demonstrating how fiscal policies can be tailored to specific ecological contexts to enhance environmental outcomes (Sosa Sanchez, 2024[62]).

A key design consideration is whether to tax inputs, outputs or observable market transactions related to biodiversity-harmful activities, such as the sale of pesticides. While taxing observable transactions may be administratively simpler, it can be less directly targeted and may lead to unintended or inefficient responses from polluters. In Norway, for example, the tax rate differs between pesticides depending on their toxicology. For each pesticide, a basic tax rate common to all pesticides is multiplied by a human health and environmental risk factor (e.g. 0.5 for products with low human health risk and low environmental risk and 9 for products with high human health risk and high environmental risk) (Böcker and Finger, 2016[63]). While this approach encourages more conservative use of pesticides and provides incentives to substitute for less damaging products, it increases the administrative burden for regulators and industry. Similarly, Mexico's Special Tax on Pesticide Production differentiates tax rates based on the classification of acute toxicity hazards, aiming to internalise health and environmental risks while promoting sustainable agricultural practices (Sosa Sanchez, 2024[62]). Such a programme is feasible in Mexico and other countries with relatively few pesticides such as Norway, which has fewer than 200 approved pesticides, but would be more difficult to implement in countries such as Belgium and the United Kingdom, where over 3 000 pesticides are registered for use (Böcker and Finger, 2016[63]).

Innovative tax designs can enhance both environmental outcomes and cost effectiveness by tailoring instruments to specific ecological and economic contexts. Evidence from various studies highlights how alternative approaches can improve efficiency and effectiveness in reducing environmental harm (OECD, 2020[14]). For example, Iho (2010[64]) suggests that taxing soil phosphorus content, rather than phosphorus use, could deliver similar reductions in phosphorus runoff while being easier to administer, as soil quality is already routinely tested in many jurisdictions. Lankoski et al. (2018[65]) demonstrated that applying nitrogen fertiliser taxes alongside a soil greenhouse gas (GHG) emissions tax in Finland could effectively reduce GHG emissions and nutrient runoff, improving overall social welfare compared to baseline scenarios, although the policy was also associated with reduced farm income. Institutional frameworks also play a role in supporting effective tax design. Mexico’s legal framework, established through the General Law of Ecological Balance and Environmental Protection (LGEEPA), provides a strong institutional basis for integrating biodiversity considerations into fiscal instruments, illustrating how governance structures can support the effective design and implementation of biodiversity-positive taxes and fees (Sosa Sanchez, 2024[62]).

Another important consideration when targeting taxes is the potential substitution effects that may arise. For example, Abate and Elofsson (2024[66]) make the case for imposing taxes on both plastic and paper bags, given their relative impacts on marine pollution. A tax on single-use plastic bags may drive consumers to shift to alternatives such as paper bags or thicker plastic bags, which may have comparable or greater environmental impacts. The OECD (2020[29]) highlights the risk of regrettable substitution, where restrictions on one material increase demand for others with significant environmental footprints. For example, paper bags degrade more easily but require more water, energy, and chemicals to produce, while thicker plastic bags may contain more plastic overall. A material-neutral approach to taxation, covering all single-use bags with high environmental impacts, can help address these trade-offs. Taxation policies should be complemented by broader measures that promote reusable alternatives and circular economy solutions (OECD, 2020[29]).

4.3.3. Garner support from stakeholders in advance of the introduction of taxes and fees

Engaging with and garnering support from a variety of stakeholders prior to the introduction of a tax or fee can be an important component of ensuring its success. Experience from the Irish plastic bag tax, for example, indicates that securing support from a range of stakeholders for the eventual introduction of the tax was considered a key requirement for its successful implementation. Relevant stakeholders in this context included the retail industry, Ministry of Finance, the local authorities, the revenue commissioners and, crucially, consumers, and various approaches were used to interact with these. A public consultation process was conducted in early 1999 to seek feedback. An extensive multi-media communication campaign was implemented to inform consumers about the purpose of the tax (Clarke, 2014[67]).

Similarly, in Mexico, stakeholder engagement was integral before introducing the revised fiscal regime for wastewater discharge rights in 2023. The government engaged with municipalities and industries early in the reform process to address technical and economic feasibility concerns, which helped tailor the policy to local capacities and improved stakeholder buy-in (Sosa Sanchez, 2024[62]). Also, in Türkiye before the implementation of the plastic bag tax, the government engaged with stakeholders through the Packaging Commission, which includes representatives from environmental organisations, industry groups, and government bodies. This collaboration helped refine the tax policy and improve public acceptance (Gözet, 2024[68]).

Public consultation processes are commonly used across a range of countries. For example, revisions to the water abstraction charges in UK in 2022 were undertaken following a three-month open consultation period conducted in 2021 to allow for feedback from relevant stakeholders on the proposed amendments (UK Environment Agency, 2022[69]). In Mexico, structured consultation mechanisms have played a critical role in the reform of fees related to the use of Protected Natural Areas (PNAs), which involved continuous dialogue with local communities, environmental organisations and tourism stakeholders. Feedback from these consultations influenced the introduction of differentiated tariffs based on ecosystem vulnerability and carrying capacity, ensuring that fiscal measures were both environmentally effective and socially acceptable (Sosa Sanchez, 2024[62]).

4.3.4. Consider a phased approach - gradually scale up and adjust as appropriate

Gradually scaling up taxes and fees can enhance their effectiveness and public acceptance by allowing time for behavioural adjustments, minimising any potential economic shocks, and providing opportunities to assess and refine policy impacts. Moreover, this phased approach might help mitigate resistance from stakeholders who might otherwise oppose sudden, significant changes. The literature indicates that the public may be more opposed to large tax changes than more moderate ones (OECD, 2020[14]). In Denmark for example, following the gradual evolution and documented success of the pesticide tax, political agreement was recently reached to further increase the tax to achieve more stringent pesticide load targets (Box 4.3). Similarly, in Mexico, the Special Tax on Pesticide Production was initially implemented with a 50% reduction in rates during its first year, allowing stakeholders time to adjust before transitioning to the full tax rate. This phased approach helped ease the adoption of the tax and provided an opportunity to evaluate its early impacts (Sosa Sanchez, 2024[62]). In Sweden, the pesticide tax was increased stepwise from USD 0.37 (SEK 4) per kilo active ingredient to USD 3.11 (SEK 34) per kilo active ingredient from 2015 (OECD, 2020[14]).2

Box 4.3. The Danish Pesticides Strategy 2022-2026

The Danish Pesticides Strategy 2022-2026 specifies that a target Pesticide Load Indicator (PLI) of 1.43 based on sales figures for 2025 will be set and will be evaluated in 2026. The Pesticides Strategy 2017-2021 had an objective of a PLI of no more than 1.96 (corresponding to a 40% reduction compared with the calculated level in 2011). The pesticide tax will be restructured to make it more attractive to use plant protection products with low loads on the environment and health. A revenue-neutral restructuring of the tax will be established, with a reduction in the basic tax to USD 3 (DKK 20) per kg of active substance and an increase in the load element to USD 21 (DKK 140) (from the previous rate of USD 16) (107 DKK).

Source: (Danish Ministry of Environment, 2022[70]), Plant protection products strategy 2022-2026: Denmark, https://mst.dk/media/fgsdn5nv/pesticidstrategi-uk-2022-2026-kopi.pdf.

Experience with water charges suggests rates are often set too low and may require revision (OECD, 2017[71]) (Berbel et al., 2019[72]).3 The appropriate rate is also likely to change as a result of changing conditions. For example, the UK revised its water abstraction licensing charges to reflect increasing pressures from population growth and climate change among other things (UK Environment Agency, 2022[69]). The new water charges, which had not changed in 10 years, are based on (i) the volume of water abstracted, (ii) where the water is taken from and (iii) how much is returned to the environment. It was estimated that the new charging framework would secure additional income of GBP 25 million per year (equivalent to USD 32 million), to be used to protect access to water and meet environmental challenges, including to help protect England’s sensitive habitats, such as chalk streams (UK Environment Agency, 2022[69]). Mexico’s reforms to the wastewater discharge fee system also followed a phased approach, where differentiated charges were gradually introduced based on pollutant levels and the classification of receiving water bodies. This allowed for adjustments over time to account for environmental conditions and the economic capacities of municipalities (Sosa Sanchez, 2024[62]).

To optimise efficiency and effectiveness, tax and fee rates should be introduced as simple scheme and then developed on robust methodology, given that methodological challenges need not require postponing implementation. For example, OECD recommended that simple proxies can be used in the beginning to set Brazil’s water charges to send economic signals to water users and pave the way for the use of more sophisticated methodologies and rate calculations (OECD, 2017[71]). In an analysis integrating farm, soil, and water models, researchers concluded that taxes could be an effective means of reducing nitrate emissions in the upper Rhine valley, but that the tax should be set at a relatively high level in order to be effective (OECD, 2020[14]).

Taxes and fees should be reviewed regularly to determine whether their rates and scope remain appropriate when environment and society change. For example, entrance fees to national parks could be reviewed to evaluate the need to scale up or adjust the fee, and to explore new opportunities to enlarge those subjects to fees (e.g. for different activities). At a minimum, existing tax or fee rates should be adjusted over time to account for inflation to avoid erosion of the tax base, which undermines the price signal they send. In Mexico, reforms to the fiscal regime for Protected Natural Areas (PNAs) have included periodic reviews to adjust fees based on environmental factors such as ecosystem vulnerability and visitor carrying capacity, ensuring that the fiscal instruments remain both effective and adaptable to changing conditions (Sosa Sanchez, 2024[62]). Similarly, Colombia has adapted its compensatory rate and minimum tax rate for forest harvesting in natural forests over the last seven years (Box 4.4). Reviews should also assess whether any exemptions are justifiable, for example small-scale water users may be exempt from charges but it is important to consider the potentially significant cumulative impact of a many small users on water bodies and other natural resource.

Box 4.4. Colombia’s Compensatory Rate for Timber Forest Harvesting in natural forests

The Tasa Compensatoria por Aprovechamiento Forestal Maderable (TCAFM) updated in 2018, is an environmental tax for access to and use of the ecosystem service of supply of wood from natural forests aimed at making users aware of forest resources and contributing to the conservation of Colombia's environmental supply and forest heritage. It is calculated based on the replacement costs of silvicultural activities that allow the volume of wood felled and extracted from the natural forest to be renewed. These costs are adjusted to the type of species and regional particularities and are taken to a mathematical expression, which expresses the amount to be paid per species in pesos per cubic meter of standing wood (COP/m3). The compensatory rate for each timber species is calculated by multiplying the minimum rate set annually by the resolution of the Ministry of Environment, Housing, and Territorial Development (Table 4.5), and the social and environmental costs caused by timber harvesting, considering the type of exploitation, regional forest availability, species category, and environmental impacts from timber extraction.

Table 4.5. Compensatory rate for timber forest harvesting

Year	Minimum Tax (COP)	CPI (%)
2018	29.492	3,18%
2019	30.43	3,80%
2020	31.586	1,61%
2021	32.095	5,62%
2022	33.899	13,12%
2023	38.347	9,28%
2024	41.906	-

Note: Based on the system and method adopted by the MADS for this tax, the minimum rate will be established and estimated in pesos per cubic meter of wood (COP/m3) and is adjusted annually based on the variation of the Consumer Price Index (CPI), determined by the National Administrative Department of Statistics.

Source: (Ministerio de Ambiente y Desarrollo Sostenible, 2023[73]), ‘’Tarifa mínima de la Tasa Compensatoria por Aprovechamiento Forestal Maderable en bosques naturales.’’ in Compensatory Rate for Timber Forest Harvesting in Natural Forest, https://www.minambiente.gov.co/negocios-verdes/tasa-compensatoria-por-aprovechamiento-forestal-maderable-en-bosque-natural/.

4.3.5. Earmark revenue from taxes and fees to support biodiversity and other objectives

In many cases, a policy objective (or co-benefit) of biodiversity-related taxes and fees instruments is to generate revenue, either for government budget, or specifically to help finance conservation. For example, according to the U.S. Department of Interior, in 2019, excise taxes on hunting, shooting and fishing equipment and boat fuel to all 50 states and U.S. territories generated revenue of nearly USD 1 billion. The funds are used to support state conservation and outdoor recreation projects (U.S. Department of the Interior, 2020[74]). In Mexico, revenue from environmental fees related to the use of Protected Natural Areas (PNAs) is increasingly reinvested in conservation efforts, although challenges remain in ensuring equitable distribution across all PNAs. Reforms since 2021 have focused on strengthening self-financing mechanisms and enhancing revenue reinvestment in biodiversity conservation (Sosa Sanchez, 2024[62]).

While introducing taxes and fees can be politically challenging, they are often more socially acceptable if the revenue generated is used to finance environmental improvements (OECD, 2010[75]). One challenge in designing these instruments is balancing their effectiveness in changing behaviour with the need for sustainable revenue generation or at least being clear on what the instrument’s primary objective is. When a tax is effective at discouraging harmful practices, as intended, its revenue base may shrink over time. This underscores the importance of defining the primary objective of the instrument and anticipating the potential need for alternative or complementary funding sources to support biodiversity goals. This dynamic has been observed in various environmental tax schemes, where long-term success leads to declining revenues as behavioural changes take hold (European Environment Agency, 2022[76]).

In the case of the Irish plastic bag tax, for example, while its intended objective was to change consumer behaviour to reduce litter, the acceptance by the Revenue Commissioners of a hypothecated fund was also central to increasing consumer acceptance of the levy. Advertising and information campaigns explicitly stated that all revenues would be used for explicitly environmental purposes (Convery, McDonnell and Ferreira, 2007[59]; Dan Nielsen, Holmberg and Stripple, 2019[77]). The proceeds of the levy go into the Circular Economy Fund, which finances initiatives to reduce waste and promote the reuse and recycling of goods.

Similarly, in Mexico, the government has taken steps to increase the transparency of revenue allocation from environmental taxes. For example, part of the revenue generated from wastewater discharge fees is earmarked for improving water management infrastructure and promoting sustainable water use practices (Sosa Sanchez, 2024[62]). In the case of the Danish pesticide tax, 60% of the tax revenue in 1998 was channelled back into the agricultural sector through different subsidy schemes, such as those for organic farming and extension services. The remaining 40% was used for public research and pesticide monitoring programmes (OECD, 2013[1]). Ex-post evaluation of the 2013 revised Danish pesticide tax found that revenue was reimbursed to the agricultural sector, primarily through a reduction in land taxes (Nielsen et al., 2023[8]).

In the Slovak Republic, National Parks are underfunded and several face unsustainable tourism pressure. However, only one of the nine national parks has administered protected area fees. The entrance fee is set at EUR 1.5 per adult for a day and EUR 0.5 per child (6-15); pensioners (over 64 years) of local municipalities are exempt. The fees generate tens of thousands of euros in annual revenue for the municipality, some of which supports efforts to run and operate the national park. Government analysis to identify funding options for parks identified PA fees as the measure that would most significantly increase revenue, with a potential to generate EUR 6.6-11.1 million per year in revenue for national parks (Gális, 2022[10]) (OECD, 2024[39]).

In many African countries, the revenue generated from protected area fees is crucial for funding anti-poaching efforts, wildlife management and community development projects (Adetola, 2023[9]). Kenya, for example, employs entrance fees in parks like Maasai Mara and Amboseli, directing funds towards wildlife conservation and local community support (Muriithi, 2022[78]).

Scope also exists to use tourism taxes to raise revenues for national parks. For example, Spain's Balearic Islands levies an accommodation tax of EUR 0.13-4, depending on the type of accommodation and the season, with the revenue used for ecosystem restoration, land acquisition, infrastructure improvements and similar purposes (Gális, 2022[10]). Similar tourism taxes are in place in several countries (Box 4.5). The potential for such approaches is also being explored in other countries such as the Slovak Republic (OECD, 2024[39]).

Box 4.5. Tourist tax as an example of earmarked revenues to protect biodiversity

The implementation of tourist taxes in various countries aims to support sustainable tourism practices. In several cases, revenue is explicitly earmarked to finance environmental conservation and local communities. For example, New Zealand introduced the International Visitor Conservation and Tourism Levy (IVL) in 2019, charging NZD 35 per visitor when applying for a visa or an Electronic Travel Authority. The levy is jointly administered by the Ministry of Business, Innovation and Employment and the Department of Conservation, with the revenue from the IVL equally divided between tourism and conservation projects. It has funded initiatives such as the "Biodiversity Investment Approach project" and the "Kakapo Recovery Programme." The levy is part of a broader strategy to create a productive, sustainable, and inclusive tourism sector that benefits both visitors and local communities. In 2024, public consultations were opened to explore the possibility to either leave the levy at NZD 35, or to increase it to NZD 50, 70 or 100 per visitor.

Belize established the Protected Areas Conservation Trust (PACT) in 1996, funded by a BZD 7.5 (USD 3.75) departure tax on visitors and a 20 per cent commission on cruise ship passenger fees. The PACT supports conservation efforts and community development projects, with revenue sources including concession fees, license fees, and donations. In 2017, the Government of Belize raised the fee to USD 20 (BZD 40). While this increase was met with concern from tourist industry providers, monthly arrivals or tourists over the next year increased by an average of more than 10%. A study has found that mean willingness-to-pay is USD 34.6, suggesting that the fee could be raised further and would serve to raise revenue for conservation efforts by an additional 50%.

In the Maldives, the Green Tax was introduced in 2015 and collects USD 6 per day from tourists staying in resorts and hotels, with a reduced rate of USD 3 for smaller guesthouses. Revenue from the tax is directed to the Maldives Green Fund, established to finance environmental initiatives. As of January 2023, the applicability of the green tax was expanded to encompass integrated tourist resorts, resort hotels and other similar tourist establishments. Moreover, the Maldives Inland Revenue Authority (MIRA) has received more than USD 63 million as Green Tax in 2022, a 4.4% increase compared to 2021 (i.e. USD 52 million), according to their statistics. Information on revenue generated by the Green Tax and how the money is allocated is made publicly available on the website of the Ministry of Finance.

Palau's Pristine Paradise Environmental Fee (PPEF), introduced in 2018, charges USD 100 per international visitor, included in the airline ticket price. Revenue from the fee supports various environmental and infrastructure projects, with allocations to the Fisheries Protection Trust Fund, state governments, and the Protected Areas Network Fund (PANF). The PANF, an independent non-profit organisation, disburses funds for protected area management, sustainable development, and research.

The British Virgin Islands charges tourists USD 10 per entry, as required under the 2017 Environmental Protection and Tourism Improvement Fund Act. The Law requires 40% of the levy funds to be earmarked for activities related to climate change and environmental protection, with another 40% going toward tourist sites and tourism-related activities and 20% devoted to tourism marketing.

Source: Belize: (Protected Areas Conservation Trust, 2023[79]), Annual Report 2022-2023, https://www.pactbelize.org/; (Casey and Schuhmann, 2019[80]), PACT or no PACT are tourists willing to contribute to the Protected Areas Conservation Trust in order to enhance marine resource conservation in Belize?, https://doi.org/10.1016/j.marpol.2018.12.002; Maldives: (Maldives Inland Revenue Authority, 2018[81]), Green Tax, https://mira.gov.mv/Pages/View/FAQ_GreenTax%20; (PSMNews, 2023[82]), Maldives receives USD63 million as Green Tax in 2022, https://psmnews.mv/en/115065#:~:text=The%20Maldives%20Inland%20Revenue%20Authority,significant%20increase%20compared%20to%202021; (World Bank, 2024[83]), Maldives: Country Environmental Analysis. Towards a More Sustainable and Resilient Blue Economy, https://documents1.worldbank.org/curated/en/099021524234511634/pdf/P1784891f12d1a0cd18d5516f8fcf6ceaf4.pdf; (Ahmed, 2018[84]), Guesthouses in the Maldives: Towards Community-Based Tourism, https://www.researchgate.net/profile/Musliha-Ahmed/publication/335443516_Guesthouses_in_the_Maldives_Towards_Community-Based_Tourism/links/5bdfd5f64585; New Zealand: (Department of Conservation, 2024[85]) , International Visitor Conservation and Tourism Levy Review 2024, https://www.doc.govt.nz/get-involved/have-your-say/all-consultations/2024-consultations/international-visitor-conservation-and-tourism-levy-review-2024/; (New Zeland Government for Immigration, 2024[86]), Paying the International Visitor Conservation and Tourism Levy (IVL). Immigration New Zealand, https://www.immigration.govt.nz/new-zealand-visas/preparing-a-visa-application/your-journey-to-new-zealand/before-you-travel-to-new-zea; (Chris et al., 2018[87]), Contribution of aquaculture to the Sustainable Development Goals, https://doi.org/10.1016/j.marpol.2018.06.020; Palau: (Srinivasan et al., 2022[88]), Marine Tourism and the Blue Economy: Perspectives from the Mascarene and Pacific Islands, https://doi.org/10.1007/978-981-19-5065-0_6; (Pacific Note, 2018[89]), Palau Collects $100 Pristine Paradise Fee, https://www.pacificnote.com/single-post/2018/01/11/pay-extra-cost-to-enter-the-pristine-paradise#:~:text=It%20can%20be%20costly%20to,and%20first%2Drate%20tourism%20hospitality; Virgin Islands: (Government of Virgin Islands, 2018[90]), Visitors Reminded Of Environmental And Tourism Levy, https://www.bvi.gov.vg/media-centre/visitors-reminded-environmental-and-tourism-levy.

In UK, the revenue generated from fishing licenses is used to fund a variety of fish management activities. Data on both revenues generated and how the revenue is allocated is publicly available on a government-dedicated website and updated annually (UK Environment Agency, 2024[43]).

4.3.6. Consider accompanying measures when deploying or reforming taxes or fees

The potential impacts of taxes and fees on households and on the competitiveness of firms should be documented, including through robust economic and evidence-based analysis. These issues can be addressed through targeted accompanying measures – such as by recycling some of the revenue from taxes or fees rather than by blanket exemptions or discounts. In Brazil, for example, revenues from water charges are not directly used to finance expenditure programmes that benefit water users in the basins where they are levied. Users therefore do not perceive the benefits of paying the charge, thus undermining the legitimacy of the instrument and users' willingness to pay (OECD, 2017[71]).

In Mexico, accompanying measures for the Special Tax on Pesticide Production include strategies to compensate for costs associated with the use of more sustainable pesticides and efforts to promote the adoption of bio-inputs. Additionally, mechanisms are being developed to improve the management of pesticide waste, such as the collection and disposal of empty pesticide containers, which complements the tax's environmental objectives (Sosa Sanchez, 2024[62]). In Denmark, accompanying measures under the national pesticide action plans include the use of a Pesticide Tax Calculator for industries to estimate tax burdens and support for Integrated Pest Management (IPM) practices, such as crop rotation, pest monitoring, and research into disease-resistant crops and new technologies to reduce pesticide use (Hansen, 2024[91]). In Türkiye, the Recovery Contribution Share (RCS) complements the plastic bag tax by covering other environmentally harmful products, alongside nationwide campaigns raising public awareness on plastic waste (Gözet, 2024[68]).

4.3.7. Continuous monitoring, enforcement and regular evaluation

Continuous monitoring and enforcement support the effective implementation of biodiversity-positive taxes and fees. Smaller-scale policies may tend to be less well scrutinised and monitored and ensuring effective systems and requisite capacity for monitoring and enforcing biodiversity-positive taxes and fees is therefore critical for scaling them up and ensuring their effectiveness (Gray and Shimshack, 2011[92]). In Mexico, recent reforms have strengthened the oversight of environmental fiscal instruments, particularly through enhanced monitoring of wastewater discharge fees and pesticide taxes. These reforms include regular audits and improved data collection systems to track compliance and environmental impacts (Sosa Sanchez, 2024[62]). In Denmark, the effectiveness of the pesticide tax is supported by mandatory annual reporting of pesticide use by all farmers, as well as regular data collection on pesticide sales to both the agricultural sector and private consumers. These data feed into the calculation of key indicators, such as the Pesticide Load Indicator (PLI), which is monitored annually to assess environmental impacts (Hansen, 2024[91]).

A lack of monitoring and enforcement may facilitate non-compliance with biodiversity-positive tax policies. For example, lax enforcement has been cited as one reason for lack of effectiveness of the pollution discharge fees that were in place prior to the 2018 Environmental Tax Law in China (Zhang, Xia and Zhang, 2023[27]). To address this, the Environmental Tax Law shifted the responsibility of collecting pollution discharge fees from the environmental agencies in the provinces to the tax authorities (Zhang, Xia and Zhang, 2023[27]). In Indonesia where abstraction and groundwater charges are managed at subnational level, enforcement of water taxes and charges is low. Groundwater abstraction taxes for example are calculated based on groundwater permits. However, since such permits are rarely being issued, there is no base to collect the groundwater tax. Limited enforcement of pollution charges and demand management instruments have therefore been found to undermine Indonesia’s water resources, both in terms of quantity and quality (OECD, 2023[93]).

In addition to effective monitoring and enforcement, regular programme evaluation is key for success of any policy instrument. The Danish pesticide tax, for example, has been evaluated several times, allowing adjustments to be made over time. The most recent updated Pesticide Plan 2022-26 states that the programme will be evaluated again in 2025, following the revisions to the adjusted tax rates (Box 4.3) (Danish Ministry of Environment, 2022[70]). Mexico also conducts periodic evaluations of its biodiversity-related fiscal instruments. For example, the effectiveness of the Special Tax on Pesticide Production is regularly assessed to determine its impact on reducing pesticide use and promoting safer alternatives. These evaluations help identify areas for improvement and support evidence-based policy adjustments (Sosa Sanchez, 2024[62]). In Türkiye, the plastic bag tax undergoes annual fee adjustments, with strict compliance checks and regular environmental impact reports showing reductions in both plastic waste and greenhouse gas emissions (Gözet, 2024[68]).

Failure to implement multiple small-scale biodiversity-positive policies could lead to substantial cumulative uncompensated impacts and empirically quantifying the causal link between environmental taxes and pollution reduction is challenging, often due to a lack of microdata and clean identification strategies. (Zhang, Xia and Zhang, 2023[27]) found that while a large body of literature examines the effects of environmental taxes through simulations or theoretical models, there is limited rigorous empirical evaluation, particularly in emerging and developing economies.

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Notes

← 1. In this report, the terms fees and charges are used interchangeably.

← 2. A preliminary analysis shows that the change in price for the pesticides might correspond to the different levels of load in the pesticides where the average price increase for insecticides is 28%, fungicides 2% and herbicides 8% with a load tax at 30 SEK/load (Pedersen, 2015[94]).

← 3.  For a review of the economics of water scarcity (including a review of price elasticity of water demand), see Leflaive (2024[11]).