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Working Papers

Are Environmental Taxes Affected by Legislatures` Ideological Positions?


CODE: IDB-WP-443
AUTHOR(s): Miller, Sebastian , Vela, Mauricio
PUBLISHED: September 2013
LANGUAGE: English
RELATED TOPICS: Government and Democracy
DOWNLOAD FILE IN: English

Abstract:

Environmental taxes have been discussed as one of the main mechanisms to deal with environmental problems. Nonetheless, instruments of this type have rarely been implemented, and the adoption of new or higher environmental taxes has faced resistance in some countries. The purpose of this work is to identify one possible political answer to why adoption of environmental taxes varies. One explanation is that legislatures’ ideological position affects the degree of usage of taxes generally and environmental taxes in particular. For example, right-wing parties tend to be less associated with environmental concerns and more associated with lower government intervention. This paper presents evidence that reflects this relationship, showing the positive association of more left-wing legislatures with higher levels of environmental taxation. A panel of data for 37 developed and developing countries over 16 years is used considering the percentage of total revenue from environmentally related taxes, the ratio of this revenue to total energy use and tax levels in industry and household sectors. The results show that most of these impacts involve environmentally related taxes in the industry sector. Proportional representation electoral systems and high seat concentration by few parties appear to be necessary conditions for the negative relation of right-wing ideology with environmental taxes.

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