| Environmental tax reform is the process of shifting the tax base from economic "goods" such as employment, income and investment to environmental "bads" such as pollution, resource depletion and waste.;The framework traditionally used to study the effectiveness of environmental tax reform is the double dividend hypothesis, which states that a green tax shift would help not only the environment by limiting pollution (the first dividend) but also the economy by reducing distortionary taxes on labor and capital (the second dividend). However, attention has been focused on pollution externalities as the destination of a shift, rather than natural resource rents. Rent is the remuneration over and above the opportunity cost and is generated by both the use and pollution of superior natural resources in scarce supply. Taxing away rent may produce benefits in terms of allocative efficiency, equity, transition to a sustainable development and, if the fiscal instruments are not profit-based, also ecosystem efficiency.;Eight European countries have started shifting the tax base from labor and capital to pollution, generally by cutting payroll taxes and raising carbon or energy taxes. Although very little evidence exists on the environmental and economic effectiveness of the moves, simulations suggest that a significant environmental dividend may result in the form of carbon emission reductions. The second dividend, defined as the impact on employment, economic activity or welfare, may be positive, depending on specific circumstances and assumptions.;Improvements in rent taxation would benefit Russia, a country facing difficulties in raising revenues, managing natural resources and guaranteeing environmental quality. Large rents are appropriated through the use of renewable and non-renewable natural resources. The estimates provided for oil, natural gas and timber suggest that capturing these rents would allow significant reductions in other taxes. The European model of environmental tax reform, which focuses on pollution charges, would be less applicable to Russia. |
