Case study: Green Tax Reforms
Most taxes have distortionary impacts, creating deadweight losses in several markets. However, taxes are necessary in most economies to support public spending, leaving policy-makers with a conundrum. Environmental taxes are an exception to the rule, since their aim is to correct pre-existing externalities; thus replacing other taxes with environmental taxes could maintain overall tax revenues while improving environmental and economic outcomes, a possibility known as the “double dividend”. Catarina Roseta-Palma has developed work on environmental and resource costs in several markets, such as water and energy, and in 2014 participated in the Portuguese Commission for Green Tax Reform, promoting a wide-ranging review of environmental taxes in the country.