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Creating Incentives for Greener Products

A Policy Manual for Eastern Partnership Countries

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The European Union’s Eastern Partnership (EaP) countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) struggle with environmental challenges related to the consumption and end-of-life management of many harmful products. This policy manual considers the potential use and implementation of four categories of product-related economic instruments to address some of these challenges: product taxes, tax differentiation based on environmental factors, deposit-refund systems and extended producer responsibility (EPR).

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Product taxes and environmental tax differentiation: Design and implementation

New environmentally related product taxes or the differentiation of existing taxes such as VAT or excise taxes can both be used to create incentives for environmental improvement. Successful introduction of well-functioning environmentally related product taxes will generally require close coordination between different branches of government, in particular between the environment ministry and the ministry of finance. There are several possible ways to implement environmentally related product taxes. This section addresses such implementation issues as revenue raising, competitiveness and income distribution concerns.

English

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