Twentieth International Conference on Environmental, Cultural, Economic & Social Sustainability

Abstract

Environmental policies have placed considerable emphasis on utilizing economic instruments, with fiscal policy and taxation serving as essential tools for achieving the sustainable development goals laid out by the United Nations. One widely applied principle is the polluter pays principle, also known as the Pigouvian principle, which has led to the creation of over a hundred environmental taxes worldwide. This approach, based on Arthur Pigou’s “The Economics of Welfare,” advocates for taxes to be set equal to the marginal social damage of pollution, thus internalizing the negative externalities stemming from effluent discharges. Despite these achievements, there is a growing perception that environmental protection goals under the sustainable development umbrella may not be accomplished within the designated timeframe. Consequently, the author challenges the effectiveness of existing environmental taxes. The author highlights that environmental taxation measures implemented in recent decades have not brought about significant changes to counter climate change or ensure the economy remains within the limits of planetary ecology. Additionally, the current taxation system penalizes circular activities. The paper offers suggestions for comprehensive and partial fiscal system reforms, focusing on tax policies that can promote a circular economy.