A Conceptual Framework for Measuring the Effectiveness of Green Fiscal Reforms

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November 2015
Gilbert E. Metcalf
Green Growth Knowledge Platform (GGKP)

This GGKP working paper provides a conceptual framework for assessing the effectiveness (strengths and weaknesses) of a green fiscal reform.  Economic theory is clear on the process for designing efficient environmental policies: eliminate energy production and consumption subsidies and use a Pigouvian fee to send appropriate signals through the market on the optimal use of different energy sources.  Beyond that policy prescription, a number of choices remain: use of revenues, costs of administration, monitoring and oversight and other practical issues.

Policies can be assessed along a number of non-environmental dimensions, including potential for raising revenue, efficiency and distributional implications, broader economic impacts (e.g. economic growth, labour market outcomes) and political feasibility. The paper views a number of green fiscal reforms throughout the world through these various dimensions.

Energy, Transport
Key search terms: 
tax, levies, energy, pollution, subsidies