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What is an Ecotax?

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An ecotax is a tax designed to increase the cost of economic activity that damages the environment. This is typically levied against products or services that create waste that is known to have damaging effects on the environment.

Value

An ecotax makes it more expensive to cause environmental damage and gives strong incentives for efficiency, reduction of consumption and movement towards more sustainable options.

Regressive Taxes

Ecotaxes are typically regressive meaning that they impact people who have a lower income more than those with a high income. For example, a tax on fossil fuels may impact low income families as they may spend a meaningful percentage of their income on energy. A wealthy individual may spend a very small percentage of their income on energy.
Ecotaxes can be implemented as a tax shift as opposed to a tax increase. For example, an ecotax can be accompanied with reduced income taxes, particularly at low income levels to account for the regressive nature of the tax.
Overview: Ecotax
Type
Ecotax
Definition
A tax on products or services that damage the environment that is designed to change consumption behavior and spark green innovation.
Related Concepts
Next: Regressive Tax
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