| Abstract: | This paper reviews potential applications of environmental taxesin the energy sector. Theoretical and practical arguments forusing environmental taxes are reviewed, and possible arrangementsoutlined for levying environmental taxes on energy. In contrastto most environmental taxes, taxes on energy have the potentialto raise revenues sufficient to alter the constraints and opportunitiesin fiscal policy. A carbon tax levied at a rate of £200per tonne could raise revenues equivalent to about 11 per centof total UK tax receipts, allowing income tax to be halved,or corporation tax abolished. Inappropriate use of the revenues,or their unnecessary dissipation, can greatly add to the costsof environmental policy. But, environmental taxes are unlikelyreduce the overall excess burden from taxation below the currentlevel, and the case for ecotaxes must thus primarily be madein terms of their environmental benefits. |
