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Environmental economics

The use of market-based instruments

The role of market based instruments in achieving a resource efficient economy (2011)

This study offers a systematic collection of experience from various countries on market based instruments addressing resource efficiency; it identifies best practices, explores in quantitative terms how taxes, charges and other market based instruments influence the scale of resource extraction and consumption, identify gaps and places for improvement, and provide a basis for policy makers about the way that these would need to be used to achieve resource efficiency. 
The study feeds into the Commission work on resource efficiency under the Resource-efficient Europe flagship initiative of the Europe 2020 strategy.

The use of market-based instruments for biodiversity protection - the case of Habitat Banking (2010)

This study investigates the scope for using market-based instruments (MBI) and more specifically Habitat Banking to protect biodiversity at Community level – and the possible conditions and limitations for their use. The use of MBI is gaining acceptance as cost-effective , with Habitat Banking a potentially efficient MBI to get business to compensate for unavoidable harm from development projects. Habitat Banking can also contribute towards meeting the post 2010 EU biodiversity target and enhance the provision of ecosystem services.

The final study results indicate that although Habitat banking can be done voluntarily, a viable market of biodiversity credits will only be created by regulation that defines equivalence between those debits and credits, and enforces compensation obligations on those creating debits by developing, polluting or damaging, thereby ensuring sufficient levels of credit demand. The comparison of Habitat banking with other MBI for biodiversity, suggests that it can offer a useful additional instrument to help biodiversity policy move towards a "no net loss" objective, which remains part of the post 2010 biodiversity target and will feature in the future policies. Moreover, the creation of market incentives can stimulate private investment in biodiversity conservation, and facilitate economies of scale and efficiencies in delivering biodiversity offsets. The study also identifies a number of other opportunities but also risks associated with delivering biodiversity conservation through Habitat Banking, while it describes some possibilities for establishing an efficient system of Habitat Banking that can work in conformity with the existing EU legislative framework.

Environmentally Harmful Subsidies: Identification and Assessments (2010)

The objective of this study is to develop a methodology for identification, assessment and quantification of environmentally harmful subsidies (EHS). The study tested the tools developed previously by the OECD on six case studies of subsidies in energy, transport and water sector. Based on this analysis and on results of a workshop, the study developed the "EHS Reform tool" for screening, integrated assessment and reform of environmentally harmful subsidies. The study includes also a methodological guidance how to assess the value of subsidies, illustrated on concrete cases.

The Potential Benefits of using Differential VAT for Environmental Purposes (2008)

Using differential VAT rates on products which are environmentally beneficial compared to their substitutes may bring about greater sales of those products in a more cost-efficient way than other policy mechanisms. This may act as a form of marketing, changing consumer behaviours. This study looks at the potential impacts of changing current VAT rates to align them with environmental goals in some specific cases - domestic energy supply (where there are currently reduced rates in some countries), food and dairy products, insulation materials, white goods and boilers. It finds that the suitability of differential VAT as a policy instrument differs greatly across products, in particular depending on the nature of the market failure in consumer behaviour which the VAT rate would be trying to correct.

Environmentally Harmful Subsidies study (2007)

This study focuses on presenting information relating to the definitions of subsidies and environmentally harmful subsidies, their quantification, arguments for the reform of Environmentally Harmful Subsidies and on identifying practical lessons for taking forward the reform of Environmentally Harmful Subsidies. The report attempts to offer practical insights into subsidy reform drawing on existing literature, the knowledge and expertise of the contributors and a number of case studies that were selected and studied.

Economic and Environmental Implications of the Use of Environmental Taxes and Charges in the European Union and its Member States (2001)

This study evaluates the economic and environmental implications of the use of environmental taxes and charges by the EU Member States. It thus constitutes a follow-up to the Commission´s 1997 communication on Environmental taxes and charges in the Single Market (COM(97) 9).

Executive Summary and Table of Contents (pdf ~320K)

As such taxes and charges are increasingly used by Member States as a cost-effective instrument to implement the ‘polluter-pays’ principle, it is important to compare their approaches and analyse the impacts. An overview (pdf ~480K) chapter presents those taxes in all Member States and also the CEEC accession candidates. Given that taxes on energy products (incl. CO2 and SO2 taxes) and vehicle taxes have already been extensively researched, the study looks in detail at 9 different types of "small" environmental taxes (in terms of revenue): NOx (pdf ~150K), water abstraction (pdf ~90K), waste water (pdf ~140K), pesticides (pdf ~220K), fertilizers (pdf ~160K), landfill (pdf ~260K), aggregates (pdf ~160K), packaging (pdf ~160K), batteries (pdf ~160K). 

For each of the 9 types of taxes, three cases of application are analysed in detail (2 cases for water abstraction taxes/charges, 4 cases for fertilizer taxes). For each of the taxes, basic issues, such as its design, administration, revenue and its use are explained. Furthermore, a detailed analysis of its environmental effects, effects on competitiveness, the internal market, trade and employment is undertaken. Please also look at the summary (pdf ~290K) of these taxes in tabular form.

Finally, for three taxes (UK landfill tax (pdf ~380K), German waste water tax (pdf ~230K), Danish pesticides tax (pdf ~290K)), a more detailed and more quantitative analysis of these effects is undertaken (individual icons for each tax). The conclusion (pdf ~120K) summarizes the key results of the analyses concerning the effects of environmental taxes and presents some key lessons for future environmental tax policy.

Study on the relationship between environmental/energy taxation and employment creation (2000)

The study provides an overview and a comparative analytical assessment of the available literature as well as existing macro-econometric models and a bottom-up engineering model on the employment effects of environmental taxation, in particular of the existing Commission proposals for CO²/energy and energy products taxes. It also identifies the economic conditions under which a tax shift from labour taxes to ecotaxes is most likely to result in positive employment effects.

A possible EU wide charge on cadmium in phosphate fertilisers: Economic and environmental implications (2000)

This report examines the economic and environmental effect of introducing an EU wide charge on the cadmium content of phosphate fertilisers. The objective of such a charge would be to reduce cadmium contamination of soils in a cost effective way. The main conclusions are that the economic impact of such a charge on EU agriculture and industry will be small. However, it may lead to a major shift in the supply of raw phosphate to the EU, creating potential problems for some developing countries.

Study on a European wide regulatory framework for levies on pesticides (1999)

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