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The difficulty for a policymaker is in ascertaining which factors should actually be included.
This decision is dependent upon the type of values held by the society which the policymaker represents. Including only ‘instrumental value’ means that only the value one can gain from something is represented, whereas ‘existence value’ would include the value of something to humans. There may be no instrumental value, but humans may value the very existence of the subject even though they may never see it, such as with a polar bear. However this is anthropocentric as it refers only to what humans value. ‘Inherent value’ refers to the concept that a species has value without any human valuing it, as the natural environment holds a value on its own.51 Further, environmental harm can be interpreted in an anthropocentric manner so that it only includes harm to humans. For example, an EU Directive defines pollution as being harmful to humans or human activity.52 Alternatively, it can be interpreted to include harm to species which humans would recognise as valuable or beneficial to
humans, which is again an anthropocentric perspective. Or it can include harm to any part of the eco-system, regardless of whether there is a benefit or loss to humans.53
28. VAL UE WITH SCI ENTI FIC E VI DENCE
The type of environmental problems involved will determine how a policymaker will draft the legislation to interpret key phrases, which will necessarily involve questioning what values are intended to be protected.
As has earlier been stated, placing an appropriate level of tax can increase environmental value and serve to achieve environmental objectives. If such substantial wide-scale and long-term benefits are scientifically provable, or if there is some serious risk of environmental
51 Stone looks at means of giving legal protection rights to inanimate objects in Stone CD, ‘Should Trees have Standing? – Toward Legal Rights for Natural Objects’ (1972) 45 S.Cal.L.Rev. 450.
52 Directive 2008/1/EC of the European Parliament and of the Council of 15/1/2008 concerning integrated pollution prevention and control (IPPC Directive) OJ L 24/8, Article 2(2).
53 UNFCCC, Article 1(1)), defines “Adverse effects of climate change” in a manner that does not necessarily involve harm to humans, but which also includes economic harm.
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damage such as health concerns, destruction of a forest, or a loss of a species, this will add weight to the value of an environmental factor when measured against a proposed economic activity. A White House report from 1965 called for the promotion of ‘public science’ in order to determine risks of pollution so that scientific need based on research could influence legislation exclusive of political influence; whether this is achievable is however outside the ambit of this thesis.54
How an environmental factor is valued is a matter for policy makers and will vary from time to time and between different societies. For example, if badgers are considered by
policymakers – following precautionary scientific advice – to be too common and therefore a pest, then a low value could be given to them.55 This would mean that if any are killed through an economic activity, little or no tax could be paid. A negative value could also mean tax subsidies for culling badgers, as an incentive to control the species. Such rates could be set for many environmental factors and reviewed periodically. Then if the badger population fell to an unacceptably low level and was endangered, the value could be increased to achieve an optimum population level. This would require value judgements being made and would entail high administration costs especially gathering the required information,56 but would only be used when the status quo needed amending.57
54 US President's Science Advisory Committee, Environmental Pollution Panel, Restoring the Quality of our Environment (Report) (Washington, D.C.; White House, 1965) at 29-33.
55 For example, UK policy on grey squirrels recognises the public value given to them but also the damage they cause to their environment and other species, which provides an optimum figure to control their population. See DEFRA, ‘Grey Squirrels and England’s Woodlands: Policy and Action’
<http://www.forestry.gov.uk/pdf/greysquirrel-policy.pdf/$FILE/greysquirrel-policy.pdf> Accessed 15/6/2010.
56 A report into VED rates for lorries invoked research into environmental impacts, which reduced overall rates by 50% whilst encouraging lorries that were more environmentally efficient. Dodgson J et al, Lorry Track and Environmental Costs (London: Department for the Environment, Transport and the Regions, 2000).
57 To demonstrate this, a range of such economic and ecological risks specifically related to GhG pollution are set out in Cutting RH and Cahoon LB, ‘The “Gift” that keeps on giving: Global Warming meets the Common Law’ (2008) 10 VJEL.. 110.
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Taxes can be used to create a market for environmental protection which would allow the market to balance the costs and benefits of an economic action in a place where more than one activity could take place. HM Treasury established a valuation mechanism in its Green Book58 to appraise whether an action is worth taking and this includes methods for valuing non-market impacts,59 distributional impacts,60 how to assess risk in the long-term where there is uncertainty,61 and crucially how to value undervalued costs and benefits.62 These are, as mentioned, all important factors for a policymaker to consider. Techniques such as surveys are used to gauge public opinion in order to ascertain values; for example surveys could help decide whether the public consider a certain area to be of outstanding natural beauty which needs preserving. Such an approach is extremely useful and shows the desire to achieve environmental objectives alongside economic ones.
In Cambodia, a reform of forestry taxes was undertaken in a similar way upon the advice of the IMF.63 An increase in forestry taxes to achieve protection of the forest was initially opposed by the logging industry, but the increase did not seriously damage the industry who managed to pay the additional revenues. This is despite a threefold increase in tax. Any modest decrease in logging was regarded as a balanced cost to achieve the environmental objective. Thus a tax set at the correct level using guided mechanisms can value the environment correctly and correct market failures. The OECD also endorse such a cost-benefit valuation, both generally and specifically to the issue of biodiversity.64
58 HM Treasury, The Green Book - Appraisal and Evaluation in Central Government (London: TSO, 2005)
<http://www.hm-treasury.gov.uk/d/green_book_complete.pdf> Accessed 10/3/2010.
As to the question of administration costs, they note that a cost-benefit analysis should also be applied
59 Ibid at Annex 4.
60 Ibid at Annex 5.
61 Ibid at Chapter 5, p. 17-34.
62 Ibid at 34.
63 IMF, ‘The IMF and Environmental Issues’ (2000) Issues Brief
<https://www.imf.org/external/np/exr/ib/2000/041300.htm> Accessed 10/3/2010.
64 OECD, Recommendation of the Council on the Use of Economic Instruments in Promoting the Conservation and Sustainable use of Biodiversity (Paris: OECD, 2004) (Adopted by the OECD Council on 21/4/2004).
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to the valuation study itself, so that it does not cost more to conduct the study than for the perceived benefits of conducting the study.65 This will further be inputted into the Universal Model.
29. CO NCL USIO N
The findings indicate that the imposition of an environmental tax does not have to be set at a level which will mean that an environmentally damaging activity ceases to exist partly or even wholly. The equation to determine the requisite level of the tax, adopted herein to advise policymakers, is explained by a Treasury report to be that which will limit the damaging activity to “a level where the marginal (private and social) costs of the environmental impacts are equal to the marginal benefits derived from undertaking the activities which cause them.”66 The crucial part in this equation is that includes both private and social costs, so that it is not purely an economic analysis.
Determining the social costs is a matter for policymakers who have a number of techniques available to value such costs; if these techniques are realistic they can go some way towards acheiving both sustainable development and a sustainable economy without pressing either beyond what is required. In doing this, it is important to consider where the burden should lie from a macro-economic perspective, taking into account various different environmentally damaging activities in order to determine how many should be permitted to survive in a society – rather than focusing on only one. This will involve further questions to determine
65 Ibid at Annex III.
66 HM Treasury, see chapter 4, n.38 at 20, para. 5.19.
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who ought to bear the burden of environmental taxation. Guidance for policymakers to decide this will be considered in Chapter 7.
CONTENTS
CHAPTER 6: METHODS TO CHANGE BEHAVIOUR ... 103 CHAPTER 7: DETERMINING WHO OUGHT TO BEAR THE BURDEN OF ENVIRONMENTAL TAXATION ... 136 CHAPTER 8: BORDER TAX ADJUSTMENTS ... 179 CHAPTER 9: HOW CAN POLICYMAKERS USE TAXATION TO TARGET THE SOURCE OF AN ENVIRONMENTAL PROBLEM? ... 208 CHAPTER 10: ANALYSIS ... 271
P ART II
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