Environmental and Public Finance Aspects of the Taxation of Energy

Posted: 21 Feb 1999

See all articles by Stephen Smith

Stephen Smith

University College London - Department of Economics


Environmental taxes in the energy sector. Theoretical and practical arguments for using environmental taxes are reviewed, and possible arrangements outlined for levying environmental taxes on energy. In contrast to most environmental taxes, taxes on energy have the potential to raise revenues sufficient to alter the constraints and opportunities in fiscal policy. A carbon tax levied at a rate of 200 pounds per tonne could raise revenues equivalent to about 11 per cent of total UK tax receipts, allowing income tax to be halved, or corporation tax abolished. Inappropriate use of the revenues, or their unnecessary dissipation, can greatly add to the costs of environmental policy. But, environmental taxes are unlikely reduce the overall excess burden from taxation below the current level, and the case for ecotaxes must thus primarily be made in terms of their environmental benefits.

JEL Classification: Q48

Suggested Citation

Smith, Stephen, Environmental and Public Finance Aspects of the Taxation of Energy. Oxford Review of Economic Policy, Vol. 14, No. 4: Environmental Policy, Winter 1998. Available at SSRN: https://ssrn.com/abstract=148500

Stephen Smith (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
44-171-504 5882 (Phone)

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