Newsletter JANUARY 2015 Vol. 3 Issue 1
Environmental Fiscal Reform Special Edition
FOR BUSINESS TO SERVE HUMANITY THE POLICY FRAMEWORK THAT SURROUNDS IT MUST BE FIT FOR PURPOSE. CURRENT PERFORMANCE SUGGESTS THAT THE ECONOMIC SYSTEM BADLY NEEDS REFORMING. IT IS DRIVING HUMAN BEHAVIOUR TO EXTRACT FROM NATURE BEYOND NATURAL LIMITS. IT IS TRANSFERRING WEALTH UPWARDS AND IN GENERAL CREATING A LUSTRELESS SOCIETY. ECONOMIC FISCAL REFORM IS THE TERM BEING USED TO DESCRIBE THE CHANGE.
Signals of blatant dissatisfaction with economic policy and the functioning of the economic system have been increasing recently. The term Environmental Fiscal Reform, which first appeared in the early 2000s, appears more frequently amid signs that the economic system itself is coming under pressure. Fiscal reform is about what governments do with the taxes they collect. The guidance they are given from mainstream economists is seriously under doubt. In the run-up to the climate talks in Paris later this year, business leaders and environmentalists alike are asking for serious reforms.
This edition of signals produced in cooperation with the Swedish Sustainable Economy Foundation.
The challenge is to find economic mechanisms that can be introduced – and many would like to see them as market-based instruments (MBI) – to encourage a circular economy for pollutants and essential minerals. A circular economy makes sure that pollutants remain apart from natural systems in quantities they can damage them. A circular economy keeps minerals circulating once extracted. At the same time, fiscal reform aims to ensure society can function and offer citizens jobs, food on the table and a roof over the head. We expect stronger signals from the inevitable collision between economic system, economic paradigms and indeed paradigms of what humanity is, with the earth systems we live within and rely on. Expect as well, to see many possible solutions presented. EFR has been around a while.
Stephen Hinton summarizes the arguments for a carbon tax with repayment
Eleven leading UK civil society groups call for reform of the economic system
Economics students are increasingly questioning the wisdom of what they are being taught.
Reports from scientists specifically pinpoint how the current system has transcend natural limits in a relatively short space of time.
One of the original limits to growth team in the 70s, the narrative about resource and nature depletion has been promoted by Professor Jørgen Randers. In a recent highly charged article he criticizes the systemic ills of relying on profit.
The interest being shown in Capitalism and its failings is illustrated by last years’ release of a book by economist Thomas Piketty: the book reached best-seller status.
Piketty’s warnings about transfer of wealth to a few are echoed by a recent study from Oxfam
That our way of life is separating us from nature and enjoyment of life is echoed in a recent article by George Monbiot.
Read: our ecological boredom.
In fact, by driving the information economy we may be crating a way of life that goes against our very nature and the way our minds work
TSSEF proposes flexible pollutant surcharges as a key to Environmental Fiscal Reform
A Simulation from TSSEF is designed to demonstrate the mechanisms and benefits of, for example, taxing fossil fuels. To illustrate their principles, the Foundation is offering to run a simulation set up as a management game. They promise everyone will gain one or two insights at least from simulating the economy.
Read: simulating emission fees
The first simulation is held in Stockholm
MORE ON EFR
Environmental fiscal reform (EFR) has been championed by the OECD since the beginning of this century by among others the International Monetary Fund (see this link) EFR, when properly designed and implemented, can meet environmental goals with net positive impacts on the economy in terms of GDP, government revenues, and employment. Reality is however complex. Concerns about sectoral competitiveness and concerns about hurting ordinary consumers have led to significant opposition.
Several developing countries have experimented with EFR as EFR has the added attraction of potentially contributing to poverty reduction and development goals.
Factors that are holding EFR back include a lack of understanding of how such instruments work and their benefits, inadequate legal/institutional capacity, political opposition to increased costs both from industry and the public, and preference for the status quo, which is typically built around command – and –control.
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