ABSTRACT
As noted in the introduction, the European Environment Agency has defined ETR as ‘a reform of the national tax system where there is a shift of the burden of taxes from conventional taxes such as labour to environmentally damaging activities, such as resource use or pollution’ (EEA 2005, p. 84). ETR is therefore a particular kind of policy instrument, which seeks to apply revenue-raising economic instruments (which may be taxes or auctioned permits in an emissions trading scheme) to resource use and pollution, in order to increase the efficiency of resource use (resource productivity) and improve the environment, and reduce other taxes such that the policy is revenue neutral overall. ETR in this interpretation is therefore a tax shift, rather than a tax increase, whereby taxation is shifted from ‘goods’ such as labour (e.g. income taxes, social security contributions) or capital (e.g. corporation taxes) to ‘bads’ (pollution, resource depletion). As will be seen, ETR was implemented on a relatively small scale in a number of North European countries in the 1990s and early 2000s, with broadly positive results.
