Environmental Taxation

Alejandro Pinzón Naranjo

1. Introduction

This paper presents a framework for understanding environmental taxation. In general terms, environmental taxation refers to a set of policy tools aimed at promoting a sustainable environment through charges, limits, or tax incentives. However, there is no universally accepted definition of what constitutes an environmental tax.

The purpose of this paper is to explain the goals of environmental taxation and the fiscal instruments used to achieve them. It begins by outlining the main aims S. 2of environmental taxation then distinguishes between different types of environmental taxes, namely, explicit taxes (such as carbon and energy taxes) and implicit taxes (including emissions trading systems and carbon border adjustment measures). It also considers environmental tax incentives with a particular focus on their interaction with the OECD’s Pillar Two framework. The paper ultimately seeks to provide a comprehensive overview of environmental taxation by examining (i) its objectives, (ii) the distinction between explicit and implicit taxes, and (iii) the role of tax incentives.

The following table presents the structure used in this article to categoriz...