Elgar original reference
Edited by Janet E. Milne and Mikael S. Andersen
Chapter 26: The future agenda for environmental taxation research
Nearly a century has passed since the idea of introducing taxes with a tax base related to emissions and other environmental burdens was first proposed by Pigou (1920). There was for several decades a disinclination for his innovative idea, widely perceived as impractical. It remained a footnote in economics textbooks for a long time and Ronald Coase (1960, 1988) even developed a formal theorem to explain why the idea would not be appropriate. Still, several economists, particularly of US origin, began from about 1960 to explore theoretically the principles of environmental taxation. With challenges of industrialization and increases in the associated pollution and material flows gaining momentum in the aftermath of World War II, the idea also attracted more serious attention among decision-makers. In France new framework water legislation, Loi sur l’eau, was presented in 1959, and it included the introduction of effluent charges to raise funding for pollution abatement purposes (Barraqué 2000). When it was finally implemented in 1971, similar systems of effluent charges on water pollution were also agreed on and adopted in the Netherlands (1971) and Germany (agreed on in 1971 and implemented beginning in 1976). It appears that local Dutch water boards, with prerogatives for taxing water users, had individually pioneered effluent charges starting in the 1950s, hence their being the first to implement the idea in practice. In the beginning, introduction of effluent charges was a pragmatic approach to settling the costs of abatement and overcoming political inertia (Kneese and Bower 1968).
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