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Edited by Janet E. Milne and Mikael S. Andersen
Chapter 19: Decoupling: is there a separate contribution from environmental taxation?
Decoupling is a crucial topic in the analysis of sustainable development. Without decoupling, continuing and increasing economic growth in developed and developing countries would come with ever-increasing environmental pressures, unavoidably destroying the carrying capacity of ecosystems with corresponding detrimental effects on the environment and societies. The prime example today is climate change. If we do not succeed in drastically decoupling greenhouse gas emissions from economic growth, the mitigation goals necessary to avoid catastrophic impacts will never be reached. Due to the importance of decoupling, it is thus essential to know how different policy instruments may support its achievement. The aim of this chapter is to address the question of whether environmental taxation makes a separate contribution to decoupling and to offer researchers some guidance on how to optimally address this question. Key to achieving this goal is to assess the effects of environmental taxes on environmental pressures and the economic variables, such as emissions and output. Distributional aspects of the tax burden (such as the regressiveness versus progressiveness of a tax), and questions about the optimal tax rate, environmental tax reforms, the double dividend, leakage and pollution havens, and the relative performance of different policy instruments play a minor role here and are covered in other chapters in this book. We also focus on methodological and statistical aspects here and address theoretical considerations only occasionally.
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