Taxation, Innovation and the Environment
- 13 Oct 2010
- Pages :
- ISBN :
- 9789264087637 (PDF) ; 9789264087620 (print)
- DOI :
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 cleaner 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 as well as 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. It covers a wide set of environmental issues and technologies, as well as the economic and policy contexts. The research methods range from econometric analysis to interviews with business owners and executives. The report also explores the use of environmentally related taxes in OECD countries and outlines considerations for policymakers when implementing these taxes.
Green growth policies can stimulate economic growth while preventing environmental degradation, biodiversity loss and unsustainable natural resource use. The results from this publication will contribute to the Green Growth Strategy being developed by the OECD as a practical policy package for governments to harness the potential of greener growth.
- Innovative Financing Mechanisms for the Water Sector
- Pricing Water Resources and Water and Sanitation Services
- Revenue Statistics 2010
- Tax Expenditures in OECD Countries
- Paying for Biodiversity
- Biofuel Support Policies: An Economic Assessment
- Tax Policy Reform and Economic Growth
- The Political Economy of Environmentally Related Taxes
- Politique environnementale, innovation technologique et dépôts de brevets
- Economic Aspects of Adaptation to Climate Change
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Annex F. Korea's Emission Trading System for NOx and SOx
This case study explores Korea’s policies towards NOx and SOx emissions. A capand- trade system was implemented in 2008 and was expanded the following year. Although too early to investigate the environmental and innovation impacts, this instrument builds on previous policies targeted towards the same pollutants. These policies bought about increased patenting but mainly in end-of-pipe technologies.
Annex G. UK Firms' Innovation Responses to Public Incentives: An Interview-based Approach
This case study investigates UK firms and the influence of various policy and market forces on their innovation response. There was a strong correlation between firm-level targets for energy use or greenhouse gas emission targets and R&D (both general and climate change related). Investor and customer pressure also appear to drive process innovation. The effect of the EU ETS was positive for overall innovation but not for climate change related innovation, highlighting the potential issues of predictability of the trading system or the issue of measuring innovation.
Annex H. The UK's Climate Change Levy and Climate Change Agreements: An Econometric Approach
This case study examines the role of the UK’s Climate Change Levy (and associated negotiated Climate Change Agreements with industry) on innovation. Firms with CCAs, who were granted an 80% reduction in the rate of the CCL, tended to be more energy intensive and use more electricity (which was taxed the highest within the levy scheme) than similar firms paying the full rate. Firms paying the full rate did not appear to experience adverse financial or economic effects. Moreover, CCA firms were significantly less likely to innovate than firms paying the full rate, including in areas related to climate change.
Annex I. Japan's Tax on SOx Emissions
This case study examines the Japanese tax on SOx emissions that was implemented in the 1970s to finance compensation to victims of air pollution. The tax rate rose very quickly after its introduction, peaking in 1987, when the system was reformed. Due to the tax, firms undertook significant abatement and adopted existing abatement technologies. However, the design of the tax brought about unpredictability of the tax rate and a lack of credibility of the overall system, ushering in a period of declining patenting in related technologies, despite increasing tax rates.
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