Environmental Taxation and Climate Change

Environmental Taxation and Climate Change

Achieving Environmental Sustainability through Fiscal Policy

Critical Issues in Environmental Taxation series

Edited by Larry Kreiser, Julsuchada Sirisom, Hope Ashiabor and Janet E. Milne

Containing an authoritative set of original essays, Environmental Taxation and Climate Change provides fresh insights and analysis on how environmental sustainability can be achieved through fiscal policy. Written by distinguished environmental taxation scholars from around the world, this timely volume covers a range of hotly debated subjects including carbon related taxation in OECD countries, implications of environmental tax reforms, innovative environmental taxation and behavioural strategies, as well as many other relevant topics.

Chapter 6: Behavioural Strategies to Support Climate Change Resilience

Amanda Kennedy and Wanida Phromlah

Subjects: economics and finance, environmental economics, environment, climate change, environmental economics, environmental law, law - academic, environmental law


Amanda Kennedy and Wanida Phromlah INTRODUCTION Environmental taxation reform is often intended to provide a strong incentive for adopting sustainable behaviours that can assist in achieving climate change resilience, such as Pigouvian taxes on energy use and other price mechanisms (Martin and Werren 2009, p. 1). Arguably, these are often the ‘first best’ instrument to support climate change resilience. Yet such ‘first best’ instruments are often abandoned, with governments demonstrating a limited appetite for these mechanisms in the light of high political transaction costs (Martin and Werren 2009). A failure to implement the recommendations of the recent Henry Review of Australia’s taxation system (which also incorporated prior proposals for a carbon emissions trading scheme) provides a clear illustration of how the political economy can frustrate a policy package. This has left Australia with no specific economic mechanisms to deal with climate change since implementation of the preferred carbon pricing scheme has also been delayed. In the absence of a credible market-based instrument focused upon climate change, the ‘first best’ instrument choice seems not to be immediately available.1 In light of this, what can be done to support climate change resilience? And, even if the ‘first best’ instrument were adopted, what tactical support would make it most likely to succeed, particularly given that any such scheme is embedded in complex multi-party transacting systems? We argue that non-market behavioural strategies are likely to be of great potential significance, either when ‘first best’ instruments are defeated, delayed or compromised; and/or even when ‘first...

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