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Environmental Taxation

Environmental taxes are on the agenda of many developing countries, for both revenue purposes and for meeting countries’ commitments on climate change and sustainable development. 

Carbon taxes are a policy option aimed at curbing carbon-based emissions responsible for climate change, in line with the commitments assumed by countries under the Paris Agreement. Carbon taxes put a price on the emission of greenhouse gases, thereby motivating companies to invest in cleaner technology or switch to more efficient practices. Likewise, consumers may be incentivized to invest in energy efficiency, change their lifestyle habits or, where options are available, switch to cleaner forms of energy. Moreover, additional revenues could be used to invest in sustainable development.

The 2021 UN Handbook on Carbon Taxation for Developing Countries responds to country demand for clearer practical guidance on policy and administrative aspects of designing and implementing such a tax. The Handbook outlines some of the common reasons why countries might want to introduce a carbon tax and provides options for policy design and administration targeted to the different needs and priorities of countries. It is meant as a practical guide, featuring numerous real-world examples and useful tools.

The UN Tax Committee initiated work on environmental taxation in 2017, beginning with a focus on carbon taxation, which led to the publication of the Handbook. In its 2021–2025 mandate, the Committee established a multi-stakeholder subcommittee on environmental taxation during its Twenty-third Session. The Committee's current work on environmental taxation is organized into five workstreams:

(a) Workstream 1: The interaction of carbon taxation with other national measures;

(b) Workstream 2: The role of carbon taxes and other measures in supporting energy transition;

(c) Workstream 3: The interaction between carbon taxes and carbon offsetting programs;

(d) Workstream 4: Carbon border adjustment mechanisms and how developing countries can avoid undesired spillover effects from the implementation of such measures by other jurisdictions; and

(e) Workstream 5: Other environmental tax measures other than carbon taxes that are relevant for developing countries.

The Committee and its subcommittee are supported by the Secretariat in the UN Department of Economic and Social Affairs.

Links:

UN Tax Committee’s publications

  • The Interaction of Carbon Taxation with other National Measures
    • Part A: Interaction between carbon taxes and other environmental measures (emissions trading and climate policy) (Advanced Unedited Version)
  • The Role of Carbon Taxes and other Measures to Support Energy Transition (Advanced Unedited Version)
  • The Interaction between Carbon Taxes and Carbon Offset Programs (Advanced Unedited Version)
  • Border Carbon Adjustments: Impact and Relevance for Developing Countries (Advance Unedited Version)
    • Part A: Carbon Leakage and Ways to Address It
    • Part B: Border Carbon Adjustment Measures

UN DESA capacity development workshops