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A value-added tax with ecological value added

Klaus Jacob on climate-sensitive fiscal policy in an IPG interview

News from Aug 23, 2021

In an interview with the ipg-journal, Klaus Jacob elaborates why climate mitigation should be integrated into fiscal policy, and how this endeavor can succeed. Taxes have a crucial steering impact and hence should promote incentives for climate-sensitive behaviors in production and consumption. So far, ecological aspects are missing in fiscal policy for several reasons. Firstly, the legislative framework does not provide a favorable ground. Secondly, designing fiscal policy ecologically valuable is rather unpopular. On the one hand that is due to the perceived negative distributional effects for society. Therefore, it must be ensured, that measures do not go at the expense of lower-income households, for example through redistribution. The debate on ecologically driven taxes, on the other hand, constitutes a communicative challenge. Fiscal policy needs to enhance its persuasive competencies instead of avoiding this debate.

Read the whole interview here.

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