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Report on ecological financial reform published by Rafael Postpischil, Dr. Klaus Jacob and colleagues on behalf of the Federal Environment Agency (UBA)

News from Sep 12, 2022

The focus of this recently published report “Ecological financial reform: Product-related incentives as a driver of environmentally friendly production and consumption patterns” is on excise duties, which have the potential to lower the overconsumption of scarce resources, reduce emissions and waste, and provide economic incentives for the recycling of products to recapture raw materials. 

In this project, options for the taxation of products were elaborated, looking at an environmentally oriented value-added tax both within the existing European legal framework and possible changes to EU law; as well as excise duties and other product-related economic instruments. The drafted proposals for VAT reforms are set out in a separate reporting document

Environmental taxes can be applied to manufacturers and producers, to traders and importers, and to end consumers. The focus lies on the price signal and the resulting incentivising effects. Environmentally oriented incentive taxes should contribute to reducing environmentally harmful behaviour, promoting more environmentally friendly alternatives, and trigger innovations. This project looks at environment-related taxes that focus on consumption. The following instruments are proposed and analyzed for their effects: an excise tax on cement, coupled with climate protection agreements for largely climate-neutral cement, the exemption of sustainable coffee from the coffee tax, a tax on carrier bags, the pricing of air freight, the transfer of costs to manufacturers of single-use plastic products within the framework of extended producer responsibility and a deposit on lithium-ion batteries. 

All potential proposals for ecologically oriented excise taxes or other economic instruments were examined to determine which regulations the affected products are currently subject to, which misguided incentives arise as a result, which reform approaches could be pursued for existing or the introduction of new excise taxes, and whether alternative approaches to addressing the misguided incentives would make sense.  

Read the full report here.  

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