Green Fiscal Reform for a Sustainable Future

Green Fiscal Reform for a Sustainable Future

Reform, Innovation and Renewable Energy

Critical Issues in Environmental Taxation series

Edited by Natalie P. Stoianoff, Larry Kreiser, Bill Butcher, Janet E. Milne and Hope Ashiabor

This timely book focuses on achieving a sustainable future through the reform of green fiscal policy. Green fiscal policies help not only provide the needed financing but may also serve the Sustainable Development Goals adopted by the United Nations in 2015. In this volume environmental tax experts review the development of fiscal carbon policy, consider the impact of green taxation on trade and competition, analyse the lessons learned from national experiences with fuel and energy pricing, and evaluate a variety of green economic instruments.

Chapter 8: The impact of environmental taxes on enterprise behavior and competitiveness – China’s iron and steel industry

Jian Wu, Xiao Wang and Zhe Yang

Subjects: environment, environmental economics, environmental law, environmental politics and policy, management natural resources, law - academic, environmental law, tax law and fiscal policy, politics and public policy, environmental politics and policy

Abstract

Environmental tax reform is now accelerating in China. Most existing studies on environmental tax policy design focus on national- and regional-level impacts, but it is crucial to understand the impact of different policy designs at the enterprise and industry level, since their choice and behavior change has a fundamental impact. This chapter uses enterprises’ relative efficiency as the proxy for enterprise competitiveness, and estimates the potential change of enterprise competitiveness under different policy scenarios using the DEA-RAM model. By observing these changes and their directions, we are able to work out enterprises’ behavior choices under the policy scenarios.This chapter creates a combination of three scenarios of environmental tax, production and emissions, to analyze the impact of environmental tax on enterprises’ production and emissions behavior. This chapter uses the DEA-RAM model to estimate the change of relative efficiency of enterprises. This model allows us to involve negative output (e.g., emissions), and give more flexibility on the sample size, so it is more applicable to achieve the objectives of this study. The chapter presents the following findings. (1) The current pollution fee policy is inefficient; its poor enforcement weakens the incentive for enterprises to adjust their behavior. (2) Enterprises with different ownership and scales perform with great discrepancy in different industries. (3) Carbon tax demonstrates a strong incentive to stimulate the production behavior change of enterprises while for companies with good potential of fuel substitution emissions tax may stimulate more pollutant reduction. In light of these findings we provide somerecommendations for policy reform.

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