A Primer on Green Taxation

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The concept of using taxation as a policy instrument to achieve environmental protection goals is not new writing in 1920, the renowned economist A.C. Pigou suggested that the problem of externalities could be addressed by imposition of a tax equal to the marginal cost of the environmental damage in question. I

In 1965, prior to enactment of basic federal or provincial environmental legislation, the Canadian government offered an accelerated capital cost allowance rate for the purchase of air and water pollution control equipment.(2) This early step toward using tax as an environmental policy instrument, was not pursued in the 1970s when governments moved to address environmental concerns by enacting a broad range of environmental laws, but the green taxation concept has recently attracted new attention, as part of the growing interest in economic instruments.

Today, use of tax as an environmental policy instrument is advocated by many environmentalists the most ambitious proposals are for "ecological tax reform" -- a massive transformation of the tax system, …