Climate change: transitions to sustainability
Climate change: transitions to sustainability

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4.3.1 Ecological tax reforms

Communities such as Findhorn already behave as if natural resources need careful management: they work hard to reduce fossil fuel use. A central assumption of this way of thinking is that people need to root economies more locally (Figure 15). To see the same impulse spread through the mainstream economy would require that the price of fossil fuels increases to reflect the real costs of burning fossil fuels. This in turn requires a revival of a nation state's capacity to regulate and redirect economies. Arguably one of the main ways of achieving this is through the tax system. Ecological tax reform implies a shift away from taxing things we value, such as work (via income tax), towards taxation of negative environmental effects. In general, these proposals assume progressive reductions in income tax by raising thresholds. In this scenario, everyone pays the full environmental costs of their lifestyles, without penalising the poorest. Although this way of thinking was for a long time the preserve of green campaigners, it has been interesting to see mainstream political parties from across the left-right spectrum toy with this radical approach to radically revising the tax system.

Figure 15
Figure 15 When people argue that we should make ‘the local’ the centre of politics and economics, they often start by growing vegetables. These are from the inspirational Centre for Alternative Technology (CAT) in mid-Wales. (Photo: Joe Smith)

These radical interpretations of what it might mean to try to account for all environmental externalities are argued to be a route to vibrant local economies. Why, given the robust logic that they seem to follow, have they not been more widely adopted by mainstream politicians? You might think that they would welcome an opportunity to cut income tax and promote environmental benefits. But politicians fear that the public are not prepared for such a shift, particularly after a period in which environmental taxation has often been applied in addition to existing taxes, hence encouraging an atmosphere of cynicism around them. The fact also remains that such dramatic shifts in the nature and balance of taxation will inevitably carry unintended consequences. Nobody can say what will happen to inflation, and the introduction of such radical plans in a nation-by-nation manner may, in fact, accelerate environmental damage in countries that do not take the same route. Their success relies on a level of committed global environmental governance that is difficult to envisage.

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