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Abstract:

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CentrePiece Article
The polluter-doesn't-pay principle
Ralf Martin, Ulrich J. Wagner and Laure B. de Preux
May 2012
Paper No' CEPCP369:
Full Paper (pdf)

CentrePiece 17 (1) Spring 2012


JEL Classification: H23; H25; Q52; Q54


Tags: industry compensation; industrial relocation; emissions trading; permit allocation; eu ets; firm data

By granting discounts on environmental taxes to heavy polluting firms, the government is missing out on significant tax revenues and achieving considerably less in reducing greenhouse gas emissions. That is the central conclusion of research by Ralf Martin and colleagues, which reveals the failings of the UK’s climate change levy. Their study shows that firms that enjoy a discount from the levy, claiming that such measures damage their ability to compete in the global economy, do not in fact face higher risks to their competitiveness. Firms that pay the full climate change levy reduce their energy use and their emissions by more than those that get a tax discount.