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Matched Legal Cases: ['art. 39', 'art. 39', 'art. 30', 'art. 39', 'sui generis', 'sui generis', 'art. 30', 'art. 12', 'art.\n119', 'art. 17']

Taxation for Environmental Protection: A Multinational Legal Study | CO-AUTHORS:, Asbjorn Eriksson, Robert Hertzog, John Tiley, David Williams, Friedrich von Zezschwitz | download
Main Taxation for Environmental Protection: A Multinational Legal Study
CO-AUTHORS:, Asbjorn Eriksson, Robert Hertzog, John Tiley, David Williams, Friedrich von Zezschwitz
This book brings together the work of scholars from England, France, Germany, Sweden, and the United States to examine the ways in which industrialized nations have used and are developing tax laws to help alleviate environmental problems. The contributors review existing and proposed initiatives in each country studied, discuss the theoretical framework behind tax initiatives, explain alternative systems to taxation, reveal problems in dealing with environmental concerns that are common to all of the countries studied, and suggest ways to more efficiently coordinate tax and environmental policies.
ISBN 13: 9780899305752
ISBN: 089930575X
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TAXATION FOR
Sanford E- Gaines
Asbjorn Eriksson
NEW YORK • WESTPORT, CONNECTICUT • LONDON
Taxation for environmental protection : a multinational study /
Sanford E. Gaines. . . [et al.].
ISBN 0-89930-575-X (alk. paper)
1. Environmental impact charges—Law and legislation.
2. Taxation—Law and legislation. I. Gaines, Sanford E.
K3585.T38
343.04—dc20
[342.34]
91-10310
Copyright © 1991 by Sanford E. Gaines and Richard A. Westin
Library of Congress Catalog Card Number: 91-10310
ISBN: 0-89930-575-X
In order to keep this title in print and available to the academic community, this edition
was produced using digital reprint technology in a relatively short print run. This would
not have been attainable using traditional methods. Although the cover has been changed
from its original appearance, the text remains the same and all materials and methods
used still conform to the highest book-making standards.
Fiscal Measures as a Policy Alternative
Strengths and Weaknesses of the Direct Regulation
The Marketable Pollution Rights Alternative
The Role of Fiscal Measures
Types of Environmental Fiscal Measures
Important Considerations in Environmental Tax Policy
Regressivity of Environmental Taxes
Need for Coherency in Tax Policy
Environmental Fiscal Policy in France
Public Funds and the Environment: An Attempted
Definition of an Environmental Fiscal Policy
The Diversity of the Public Funds Allocated for
The Legal Status of Some Environmental Taxes
Environmental Taxes in Germany
General Considerations Affecting Taxes and
Environmental Protection in German Law and Policy
The Existing Tax Law
Environmentally Directive Special Taxes and Fees
(Sonderabgaben)
Environmentally Directive Tax Reform Proposals
Environmental Taxes in Sweden
Environmental Policy and Income Tax Rules
The Legislative Authorities
General Principles of the Income Tax System and
How They Affect the Environment
Provisions that Provide a Tax Benefit, but that Are
Not Slanted to Favor Environmental Issues
Environmental Taxes in the United States
Compatibility of Tax and Environmental Policies
ABOUT THE EDITORS AND CO-AUTHORS
This unusual book is the work of academic experts in tax law and environmental
law from five industrial countries: France, Germany, Sweden, the United Kingdom, and the United States. As far as we know, it is the first book in English
on the subject of environmental tax law—and the first book in any language to
look at this issue comparatively.
The topic may seem esoteric at first blush, but in fact there has been an upsurge
of interest throughout the world in the use of economic and fiscal incentives to
reinforce environmental protection policy. The authors believe that a comparative
perspective on the successes and failures of environmental taxes will be especially
valuable as the search expands for new strategies to protect a world environment
increasingly perceived to be at risk.
The idea for the book originated with an article by the editors in the Boston
College Environmental Affairs Law Review on the subject of the compatibility
of U.S. income tax law and U.S. environmental policies. The article was noted
by the publisher, who invited the preparation of a book on the same general
subject. The editors and the publisher agreed that a comparative study of the
subject would be especially useful to a wide audience.
With the exception of an opening chapter on the general theory of using fiscal
measures as instruments of environmental policy, the book is organized as a
series of country studies. Each chapter begins with a description of the particular
country's legislative and administrative systems as they relate to tax and environmental matters and then surveys tax laws and other fiscal measures that may
influence environmental control. Although we deliberately kept the format of
the chapters loose in recognition of the wide variation among the countries, each
chapter discusses the compatibility of the country's general tax system with its
environmental policies and, most interestingly, describes each country's initiatives in advancing environmental values by means of the tax system.
No author of this book says that modifications of national tax systems (or
even international taxes) should be the sole mechanism for the collective control
of national, much less global, environmental problems, but they agree that taxes
can operate as powerful mechanisms all the same and will become an enduring
device for environmental control. Ultimately, worldwide cooperation is likely
to depend on non-tax strategies, such as a multilateral treaty to restrict greenhouse
gas emissions. Taxes can supplement such treaties, but are no substitute for
agreement on environmental objectives and specific rules of conduct to achieve
Readers ought to know that this book was prepared with very modest financial
support. In particular, we owe it to our contributing authors to explain our role
as editors. Each non-English-speaking author was responsible for translation and
participated directly in that process. None of them had sophisticated resources
available to assist in that demanding task. As editors, we reviewed the English
versions of the chapters and sought clarifications by telephone or telefax, but
we did not send chapter manuscripts back and forth. Consequently, we made a
number of editorial changes entirely on our own. Moreover, we often modified
footnotes to bring them into greater harmony with U.S. citation style. In this
process, our editing no doubt occasionally misconstrued the nuances of the
nation's laws; for this we apologize to our authors and solicit the indulgence of
our readers for minor misconstructions and departures from stylistic norms.
As always, many debts are due for the publication of this book. First, we
must thank the universities and institutes that provided support for this project.
The Environmental Liability Law Program at the University of Houston Law
Center supported the initial reasearch and provided travel funds for the editors
to meet with the authors in Germany. The Environmental Institute at the JustusLiebig University of Giessen, Germany, provided the facilities and meals for
the authors' meeting. We all owe particular thanks to our collaborator Professor
Friedrich von Zezschwitz for arranging the use of Giessen's facilities and for
acting as a most gracious host during the three days of our meeting. In connection
with that meeting, we should also note the unique contribution to our discussions
of Professor Oskar Schutzenmeister of the University of Jena, although the speed
of German unification rendered moot any consideration of the tax law system
of the former German Democratic Republic. Finally, the home universities of
our other authors deserve recognition: Cambridge University, the University of
London, the University of Umea (Sweden), and the Robert Schuman University
We also owe special thanks to our two editors and their staff at Quorum Books
for seeing this ungainly project through to completion. Finally, the editors would
like to recognize the assistance of the Environmental Liability Law Program
staff at the University of Houston. Diana Huezo at the university has earned a
special tip of the hat for her good cheer and diligence.
The nations of the world face a daunting task to slow, and ultimately reverse,
the deterioration of the planet's environment. Recent scientific assessments of
the condition of our air, water, lands, and oceans have laid to rest any reasonable
doubt that human activities are causing severe environmental damage. Throughout the world, environmental issues are moving to the top of national and international political agendas. As Mexican President Salinas expressed it on World
Environment Day, 1990: "If we don't address the issue of global ecology, we
won't have to worry about the other issues."
The question remains: Which actions will work best? The search for solutions
is exasperatingly difficult. As the World Commission on Environment and Development concluded: ' T h e rate of [environmental] change is outstripping the
ability of scientific disciplines and our current capabilities to assess and advise.
It is frustrating the attempts of political and economic institutions, which evolved
in a different, more fragmented world, to adapt and cope." 1
Policymakers face a dilemma. On the one hand, the gradual deterioration of
the global environment is palpable, but scientists remain unsure of the nature or
extent of the change or its consequences for humanity. On the other hand, people
are familiar with their current circumstances, and standards of living for much
of the world's population are better than ever. Apprehending environmental
danger, but not wanting to disrupt existing social systems, politicians seek legal
and administrative strategies that can cause significant changes in behavior without unduly impairing economic activity.
Several strategies are available.2 Conventional administrative regulation of
economic activity through standards based on the best scientific assessments or
the best available control technologies has been widely used and refined during
the past twenty-five years. With considerably less success, legal rules have been
applied to hold enterprises responsible for the damage they have caused to
neighboring properties or residents, or even to the environment in general. In
some circumstances, substantial changes have been brought about by the simple
process of collecting information on environmental hazards and making it public.
Finally, there are numerous economic strategies designed to induce, rather than
to compel, private entities to protect the environment. As governments reach
the limits of what is achievable through direct regulation and legal sanction,
non-legal strategies will assume greater and greater significance.
This book is about one class of economic measures that is beginning to receive
focused attention as an instrument of environmental policy: fiscal measures such
as taxes, fees, and other government charges or benefits. All governments depend, of course, on taxes to finance their national policies. As environmental
management occupies more of the government's attention and places greater
demands on the public treasury, tax policy will inevitably become a factor to
consider in the formulation of government environmental policy. In our view,
there are even more compelling reasons to consider tax and environmental policy
together. Government tax collections and expenses for environmental protection
are both significant cost factors for businesses and individuals. Governments
will want, at the very least, to be sure that the tax system works in harmony
with environmental policy. Better yet, if they can harness taxation directly and
wisely to promote important environmental objectives, governments can gain
even greater economic efficiencies and accelerate the achievement of environmental quality improvements.
Although the use of fiscal measures to promote environmental protection has
not yet received the political attention it deserves,3 countries around the world
have experimented with some tax and fee systems. To draw on this base of
experience, this book brings together, for the first time, studies of fiscal measures
for environmental protection in five industrial countries: France, Germany, Sweden, the United Kingdom, and the United States.
The remainder of this introductory chapter will present the theoretical foundation for using fiscal instruments to promote environmental policy, provide a
classification of the major types of instruments, and explore some of the limitations and difficulties that may arise in any country in formulating specific
environmental tax measures. It will conclude with a brief description of the
analytical approach to each of the five studies of national fiscal policy.
When environmental protection emerged as a significant policy concern in the
1970s, the first response was to try to apply existing laws and systems to environmental problems. In the United States and Japan, among others, this meant
that lawyers tried to use civil code or common law principles to prevent environmental damage in specific instances or to force companies to pay money
damages for injuries to personal health or property. Although many of these
lawsuits were successful and established legal rules that continue to be applied
in cases of clear threat or tangible injury to the environment, policymakers
understood that national programs for protection of the environment could not
depend on the outcome of individual lawsuits about specific instances of pollution
or other harmful activities. New approaches were needed that dealt with environmental problems more comprehensively.
Supporters of the environmental protection movement proposed two basic
strategies. One strategy, starting with a concept of pollution as releases into the
environment beyond the remedial capacity of the natural environment, posits a
set of objective environmental quality standards to be achieved through direct
controls on polluting sources, such as limits on the amount of sulfur dioxide that
a factory could emit into the atmosphere. The system of direct "command-andcontrol" regulation followed the familiar pattern of government regulation of
other economic activities and was therefore rather easily accepted by politicians,
civil servants, and even the regulated industries.
The second fundamental strategy, articulated by a number of environmental
economists, viewed pollution and other damage to the environment as external
costs of economic activities that were not properly accounted for in free market
decisions and therefore resulted in ''market failures."4 From this economic
viewpoint, the preferred solution is to devise various legal and institutional
mechanisms to correct the failures of the market so as to force private parties
in the market to internalize into their prices all of the environmental costs of
their products. Once environmental costs are internalized, free market competition will assure protection of the environment most efficiently. A baffling
question is whether it is enough to merely price an environmentally destructive
product more accurately, or whether the revenues ought to be used to remedy
the damage. As astute readers of this book will notice, there is no consensus on
this issue among the authors.
In recent years, fiscal measures have been recognized as one of the primary
tools in this economic strategy. Because most countries at first heavily relied on
direct regulation and only recently have begun to adopt economic measures on
a broad scale, it will be useful to recapitulate the strengths and weaknesses of
direct regulation as background for our consideration of fiscal measures for
STRENGTHS AND WEAKNESSES OF THE DIRECT
Command-and-control approaches have accomplished major reductions of industrial pollution and continue to be the central feature of environmental protection programs in free market as well as state-managed economic systems.
Direct regulation has important strengths that should not be forgotten. It establishes an objective standard of environmental quality or pollution-control performance that must be achieved in all locations and applies equally to all polluting
sources. It allows the government to establish general rules, rather than attempting to evaluate the individual circumstances of thousands of different cases. It
tends to insulate the bureaucracy from corruption by severely restricting the
scope of administrative discretion. From the viewpoint of private firms, direct
regulation helps with business planning because it sets fixed rules that do not
change frequently, are not subject to local adjustment, and apply equally to all
Nevertheless, direct regulation has serious limitations. It is an inflexible system
that generally achieves its results only at the cost of significant economic inefficiencies, inequitable competitive effects, and the inhibition of technological
development. Moreover, direct regulation can be costly to administer and enforce
if there are many polluters. Consequently, direct regulation often falls far short
of its intended environmental objective. During the last twenty years, for example, the air quality in the United States has improved in terms of sulfur dioxide
and particulate matter, which come primarily from a few thousand industrial
facilities, but it has not improved at all in terms of nitrogen oxides and photochemical oxidants, which come from countless different sources, including over
100 million automobiles.
Command-and-control regulation can distort market competition both within
and between market sectors. In one respect, direct regulation favors small businesses. With a large population of polluters and a small staff of administrators,
it is difficult to force compliance. There is a tendency to concentrate enforcement
efforts on large polluters and to let the smaller ones go uninspected. Voluntary
compliance by small polluters is unlikely if they think that non-complying competitors will gain an advantage. In another respect, however, direct regulation
can be exploited by large firms for competitive advantage. They can support
strict regulations that are more easily achieved by large-scale operations. This
strategy not only squeezes out smaller companies, but also creates barriers to
entry of new, and perhaps innovative, competitors. Large companies can also
delay investments in pollution control by using their resources to pursue legal
rights of adjudication and appeal to resist the regulators.5
Suppression of new pollution control technology is another drawback of direct
regulation systems. The simplest case occurs when the regulation dictates the
kind of equipment the polluter must use. Even when the regulation specifies a
standard of performance, rather than a particular piece of equipment, the technical
complexity of the performance standards and the sanctions for failure to meet
them favor the application of known technologies over experimentation with
new ones. Worse yet, direct regulation cannot easily accommodate radical new
technologies, such as the use of alternatives to the gasoline-fueled internal combustion engine for automobiles.
Perhaps the most serious criticism of command-and-control regulation, however, is its economic inefficiency. Direct regulation reduces the amount of a
harmful substance in the environment by forcing each polluter to meet the same
standard (e.g., not over 50 milligrams of particulate matter per dry standard
cubic meter of exhaust gases). The cost for polluting sources to comply with
this standard will typically vary from producer to producer. Economic savings
result if the producers that can reduce their emissions most cheaply control
pollution more than those who can reduce their emissions only at great cost. But
it would be extremely expensive to administer such a system of variable emission
rates through direct regulation. This is where economic strategies come into play.
One option would be for the government to create a ' 'market" in pollution
rights.6 Another option is for the government to apply fiscal measures designed
to act as incentives for environmentally correct behavior. This book will focus
on fiscal measures, but the marketable pollution rights approach deserves some
consideration as an alternative.
Using the marketable rights strategy for pollution reduction, the government
fixes an annual limitation on the amount of a particular pollutant that a group
of sources can produce in a particular region. The region can be small (e.g., a
portion of a river basin) or large (e.g., the eastern United States), depending on
the type of pollutant and the harmful effect to be prevented. Once the overall
level of pollution has been fixed, the government distributes "rights" to a share
of that pollution on some legal basis, such as current levels of pollution discharge.
Then the government steps back, and the individual pollution sources are allowed
to buy or sell units of these pollution rights among themselves.
To illustrate, a marketable rights system has been enacted to reduce sulfur
dioxide (SO2) emissions from electricity generating stations in the eastern United
States in order to reduce acid deposition in the United States and Canada. The
target is to steadily reduce SO2 emissions by 10 million tons per year within ten
years. Current emissions are about 20 million tons, so the goal is to reduce
emissions by 50 percent. The marketable rights system begins by granting each
source a right to pollute that requires a 50 percent reduction within ten years.
If a factory plans to close, it can sell its rights to another source. More commonly,
sources for which pollution control is expensive will be induced to pay other
sources to reduce their pollution by more than 50 percent.
If the law allows the sources to trade or sell their permit rights, a market for
the rights should develop immediately. The sellers will be enterprises that can
reduce pollution at a low cost. The buyers will be polluters that find buying the
right to pollute cheaper than abating the pollution. Over the region as a whole,
emissions will be reduced by 1 million tons, the legislated annual target. The
legislature or government administrator cannot, and need not, know in advance
what the price of the rights will be. The price will depend on the financial and
operational circumstances of the existing sources.
The results are desirable in a number of respects. First, the administrator can
force a specific level of pollution abatement that is based on a scientific consensus.
Second, there is a minimum of government interference with daily business
operations. Third, the system is efficient. The total cost of abatement is minimized; those who find it cheapest to abate will do so first.
Several terms are used to describe the various emissions trading systems. If
the trading of emissions occurs entirely within a large facility, such as a steel
mill or a chemical plant, this is known as a bubble concept. That is, all the
emissions from the many different source points at the plant are put inside an
imaginary bubble, and the government controls only the total level of emissions
from the bubble. If two independent sources agree to a trade that allows one to
increase emissions when the other reduces emissions, this is called an emissions
offset. The ratio of the offset can vary according to the overall level of desired
pollution reduction; in Los Angeles, the reduction must exceed the increase 2:1.
If a source wants to reduce emissions (e.g., by closing part of the facility) and
save its emissions rights, those rights can be put in an emissions bank for its
own use or for sale to others in future years.
In spite of its benefits, a marketable pollution rights system is not always the
best approach. Because pollution control entails long-term capital investment,
the market will work well only when the total amount of rights can be held
stable for many years. If new scientific data require the government to reduce
the number of rights unexpectedly, confidence in the market will be undermined.
There is also some reason to fear that wealthy firms will attempt to manipulate
the market or purchase pollution rights simply to prevent competitors from
operating. Thus, if the amount of acceptable pollution is subject to rapid change,
or if regulation of the market becomes necessary to prevent abuses, public policy
would favor a tax, rather than a laissez-faire approach.7
As we have noted, microeconomists view pollution as a market failure arising
out of the tendency of market prices to undervalue the environmental costs
associated with producing the good because the producer does not usually pay
for polluting the air or water. The economists' solution is to increase the price
of the product so that its true costs of production, including costs borne by society
as a whole, are reflected in the price. Fiscal measures are the most direct and
manageable method of price correction.
In theory, fiscal measures should be calibrated to assure that the marginal cost
of pollution control (the capital and operating expenses plus the tax or fee) equals
the value of the marginal harm imposed by the last unit of pollution. In practice,
of course, this theoretical price cannot be determined because we do not fully
understand the degree of environmental harm or its full social costs.8 Economists
therefore resort to the next best strategy, which is to fix the tax or fee at a level
sufficient to drive the overall level of pollution down to a desired level, below
which the polluter would find it more profitable to include the fiscal burden in
its cost structure than to not produce the item. In many cases, however, the level
of tax or fee that would result from this approach is so high that it is politically
unacceptable. To take a current example, most politicians are avoiding a full
carbon tax to prevent global warming because such a tax would impose billions
of dollars in price increases on their economies. Thus, most countries that use
taxes or fees follow a ' 'third best" approach, setting the level of the fiscal price
to assure that there is at least some pollution abatement and coupling fiscal
measures with direct regulation and even pollution control subsidies.9 Legislatures can enhance this relatively weak approach by assuring that the revenues
are used for pollution abatement.
Fiscal measures fit the microeconomic model by occupying the gap between
the producer's direct costs and the "true" price that includes the full measure
of external costs. How the proceeds are spent is irrelevant in the underlying
theory of market failure. Certainly, however, anyone who functions in the real
political world will not be satisfied merely to enjoy the sterile truth that pollution
is occurring at the right price, but will argue that the revenues should be used
to repair or prevent the environmental damage that continues to be tolerated.
In short, microeconomic solutions are conceptually appealing, but offer no
magic answers because of the difficulty of applying them. Nonetheless, their
models are important for at least two reasons: (1) they provide a conceptual
expression of the problem of environmental hazards, and, (2) the strong consensus among economists on the validity of their analyses must be anticipated
in any discussion of environmental policy, especially fiscal measures.
We have used the term fiscal measures thus far as a general term to embrace
a variety of taxes, fees, and other financial measures imposed through government
legislation or order and collected by public authorities for public use. Before we
proceed any further, we need to define fiscal measures more precisely and classify
some of the more common varieties that will be mentioned in the chapters on
When we use the term fiscal measure, we mean to include almost every method
by which the government—be it local, regional, or national—establishes the
legal requirement of individuals or enterprises to pay a sum of money that
ultimately goes to the government or to some public or quasi-public entity. We
also mean to include those elements of any fiscal measure, such as credits or
subsidies, that reduce or rebate the amount of money owed if the paying party
takes certain defined actions.
The most common fiscal measure is a tax. Although there are many different
bases for taxes, such as property, gross income, profit, or value, all taxes are
similar in that they are payments made to the government by all persons or
businesses that have taxable possessions or transactions. Other fiscal measures
are similar to taxes, but are legally distinct under various national laws and
constitutions. For example, a "fee" can be thought of as a payment to the
government in return for permission to act in a certain way, such as a fee for
discharging waste water or a fee for putting out garbage for collection. Many
other terms are also used; in English, they include charges, levies, duties, and
imposts. By whatever name, they nevertheless fit our general definition of fiscal
measures because they are payments to the government for certain actions,
transactions, or property ownership.
We exclude from the fiscal measures covered in this book only two types of
payments to the government. One type is the deposit-refund system, in which
the government collects a charge on a certain product or material, but refunds
that payment once the product is returned or properly disposed of. Depositrefund systems are a powerful tool, particularly to encourage proper recycling
or disposal of consumer products. They are sufficiently distinct from taxes or
fees, however, that we decided not to cover them in this study. The other type
of payment to the government that we will not discuss is the penalty or fine for
violation of a legal limit. In spite of the obvious intent for penalties to create a
economic incentive to comply with the law, we consider them predominantly
legal, punitive tools, rather than fiscal measures. Similarly, any liability owed
by particular private parties to the government to compensate for environmental
damage falls outside our definition of fiscal measures.
Although we have given a general definition of fiscal measures here, this book
does not follow a standard terminology for the specific measures discussed. As
noted above, most legal systems employ a variety of common terms, such as
tax, fee, or charge, but these terms have very precise legal meanings within
each legal system and thus differ from one country to the next. The separate
chapters describe the general institutional and legal structure of fiscal measures
in each country and_define.the terminology used within that country.
Even if terminology is not standardized among the different countries, almost
every country uses several basic strategies in designing its fiscal system. To help
set a general theoretical framework for the five country studies, we describe
these basic strategies here in universal terms.
Fiscal systems traditionally employ a variety of taxes on forms of consumption
for mixed purposes of raising revenue (e.g., motor fuel taxes), adjusting tax
equity (e.g., special taxes on large automobiles), or increasing the cost of a
particular product in order to reduce consumption (e.g., cigarette taxes). In the
name of environmental taxation, many consumption taxes have been proposed,
and a few have been adopted. Some such taxes are essentially new taxes, such
as taxes on packaging materials. In other cases, such as proposed increases in
motor fuel taxes, the recent initiatives represent the transformation of the tax
from one designed primarily to raise revenue into one designed in large part to
reduce consumer demand for the product in the name of environmental policy.
Payments into Trust Funds
A trust fund system imposes a tax or fee on some particular activity, such as
the shipment of crude oil in an ocean-going tanker, in order to create a fund
dedicated to a related environmental undertaking, such as paying for all cleanup
costs and damage from an oil spill. The funds go into a separate account that
defrays or substitutes for the individual legal liability of one or more taxpayers.
Trust fund taxes are politically palatable because they are focused on specific
environmental risks and do not put the legislature in the position of voting for
a general revenue tax. Nevertheless, difficult questions arise in establishing such
taxes. Which transactions and taxpayers should pay the tax? For example, should
shipping companies or cargo owners pay into an oil spill fund? Equally difficult
questions concern the appropriate rate of tax to assure that the fund is adequate,
but not excessive, and that the sources of risk are appropriately motivated to
minimize the damage the fund covers.
This fiscal measure requires payment for the release of pollutants into the
environment, usually based on the type of substance and the quantity released.
The German waste water discharge fee system is one of the oldest and best
known examples of this device. The Swedish tax on carbon dioxide emissions
reflects recent public pressure for such taxes to reduce global climate change.
In spite of their theoretical elegance, pollution taxes have not been widely
adopted. Some of the resistance to them has a legalistic or moral basis, summed
up in the description of such taxes as "licenses to pollute." They also suffer
from ambiguity about their purposes and their consequences. Are they designed
primarily to raise revenue, to encourage polluters to reduce their emissions, or
to "compensate" for the environmental damage caused by the pollution? In the
real world, pollution taxes seem to encompass all three objectives. The result is
that the factors of most interest to potential taxpayers—what pollution will be
taxed and what the rate will be—are decided somewhat arbitrarily and tend to
express social values, rather than careful economic analysis.
These taxes are typically supposed to appropriate profits that a taxpayer earns
as a result of some external factor, such as a sharp increase in the price of the
taxpayer's output due to a foreign cartel or legal restrictions on output of the product. The U.S. tax on chlorofluorocarbons (CFCs) serves as an example, although
in fact the legislative history of the act does not speak of it in these terms. The tax
is based on the expectation that increasingly stringent limits on the amounts produced will increase the price of CFCs because CFC consumers will pay a major
premium to buy the remaining stock of CFCs until substitute materials become
available. The effect of the tax is that the manufacturers who created the environmental risk of stratospheric ozone depletion will not profit from the very measures
intended to reduce that risk.
Income Taxes (and Credits)
In most countries, the income tax on individuals and businesses is the backbone
of public revenues. At the same time, most income tax systems are substantially
affected by a variety of credits or allowed deductions from taxable income that
have been introduced to help shape economic investment and individual behavior.
Common examples include personal income tax adjustments for the cost of
purchasing residential property and business tax adjustments for the extraction
or use of natural resources. Even now, most adjustments to the income tax laws
have not been written with environmental policies in mind. Nevertheless, they
should not be neglected in our brief synopsis of the major fiscal measures
IMPORTANT CONSIDERATIONS IN ENVIRONMENTAL
Tax Incentives and the "Polluter Pays" Principle
Fiscal measures can be used to modify behavior through either the "stick"
of taxing undesirable activities more heavily or the "carrot" of tax savings for
desirable activities. Legislators are understandably more comfortable granting
tax subsidies than imposing tax increases. Such subsidies may conflict, however,
with the "polluter pays" principle.
The "polluter pays" principle, first enunciated by the Organization for Economic Cooperation and Development (OECD) and later adopted as official policy
by the European Community (EC), expresses the central notion of environmental
economics that the cost of pollution should be internalized and added to the price
of goods. A corollary to the principle is that the public sector should, in most
cases, not grant subsidies to polluters because the subsidies defeat the costinternalization goal. All five countries studied in this book are OECD members.
Their governments must therefore be cautious and meticulous in their use of tax
subsidies in order to avoid the charge that their policies violate the "polluter
pays" principle.10 It is not always easy to determine just what fiscal measure
may be found unacceptable as a subsidy. At one extreme, a tax credit has the
flavor of a direct subsidy; at the opposite extreme, a grant of exceptionally rapid
depreciation for pollution abatement equipment can well be argued to involve
merely the timing of a deduction, as opposed to a grant of permanent tax relief.
An even more perplexing question is whether a tax rate reduction should be
deemed a subsidy if it reduces the overall tax payment to a level significantly
below the normal range for EC or OECD members.
A major policy question in any tax system is this: Who ultimately bears the
burden of the taxes? To put it simply, does the tax fall disproportionately on the
rich or the poor? Most proposals for environmental taxes involve either taxes
on environmentally harmful consumption (e.g., gasoline taxes) or taxes paid by
industrial polluters that may be passed on to consumers via higher prices. The
regressive effect of consumption-based taxes is well known. Because poor people
spend a higher proportion of their income on consumption of goods than do the
wealthy (who usually devote some of their income to savings or non-consumptive
expenditures), consumption-based taxes affect the poor disproportionately. This
will be true of carbon taxes, packaging taxes, and a variety of other "eco-tax"
The distributive effect of taxes paid by polluters is less simple, but is also
likely to be somewhat regressive. The key variable is how much of the tax will
be passed on to consumers and how much may be borne by shareholders and
employees. A company's ability to pass its taxes on to the consumer depends
on several factors, such as the price elasticity of demand for the product and the
level of competition. For example, if there are numerous substitute products that
become relatively cheaper as a result of the tax, the producer's owners and
employees must bear most or all of the tax. If substitutes are not readily available
and all competitors are equally affected by the tax, most or all of the tax will
be passed on to consumers if demand is elastic.
The studies in this book do not deal extensively with the distributive effect
of the taxes described, nor do they propose remedies for regressive effects.
Nevertheless, those who may wish to propose taxation as a deliberate instrument
to promote environmental protection must be sensitive to the distributive effects
of their proposals and must be prepared to offer corrective measures consistent
with a national policy on tax progressivity. One solution is a general tax cut
with a progressive impact.
A preliminary study by the editors of this book revealed an almost complete
lack of coordination between the income tax system of the United States and its
avowed environmental policies.11 Indeed, they often conflict with each other,
so that the incentives for businesses to reduce their taxes may actually aggravate
or perpetuate environmentally harmful practices. For example, U.S. tax law
disproportionately encourages the extraction of toxic minerals, such as mercury
and asbestos, even though U.S. environmental law attempts to restrict their
release into the environment.
The studies in this book shed some light on the degree of coherency in the
national policy in five countries. From the perspective of promoting environmental protection in the most cost effective manner possible, correcting the
existing tax structure may be more significant than devising innovative eco-taxes.
A full-scale legislative review and reform of these kinds of dissonances is long
In the longer term, the growing importance of environmental affairs clearly
demands a stronger institutional coordination between the divisions of government responsible for tax legislation and those responsible for environmental
policy. At the very least, governments should assure that proposed tax legislation
undergoes formal evaluation of its environmental impact. Better still, they should
establish meaningful channels of communication between environmental ministries and finance ministries in order to gain the full effectiveness of coordinated
planning and policy-making.
A third and perhaps most important area for coherency between tax policy
and environmental policy is the objective evaluation of the effectiveness of
environmentally oriented fiscal measures. Which incentives work? Why or how
do they work? The economic analysis of the real-world effects of tax policy on
the behavior of firms and individuals is a difficult task deserving of substantially
greater attention from economists than it has so far received. It has critical
importance in a time when governments are searching for economic incentive
systems, including taxes, to promote complex, but urgent, policies that cannot
be effectively administered through central regulation and direction.
Each chapter has the same basic organization. Each begins with a general
description of the governmental and legal structures of the country and explains
how environmental taxes germinate in the given institutional medium. The second
part of each chapter evaluates the coherency of each country's general tax structure with the basic elements of the country's environmental program. The third
and generally central part of each chapter describes the fiscal measures already
adopted as part of the overall environmental protection strategy—and sometimes
selective proposals for change. Where data or studies are available, the description is accompanied by an evaluation of the effectiveness of the fiscal measure
from the environmental policy point of view. Unfortunately, there has been little
effort to follow up on the initiatives with empirical studies to see if these experiments are working. As lawyers, the authors are not themselves well qualified
to correct this deficiency. We implore our economist colleagues to come to our
The book is not a strict comparative study. For example, the authors make
no effort to identify fiscal measures used in one country that are applicable to
other countries. Rather, each chapter focuses on aspects of the fiscal legislation
in that country that are significant to national policy. We invite our readers to
draw their own conclusions about which mechanisms are the best and which
legislation is the most enlightened. We will have accomplished our objective if
we have inspired others to consider and to formulate the use of fiscal measures
in general as an integral part of public policy to protect the environment.
1. World Commission on Environment and Development, OUR COMMON FUTURE
237 (1987).
2. There are many different ways to catalog the available environmental strategies.
In one recent report to the U.S. Environmental Protection Agency, a group of experts
identified six basic strategies: " 1) scientific research and technical innovation; 2) provision
of information; 3) market incentives; 4) conventional regulatory standards; 5) enhanced
enforcement; and 6) cooperation with other agencies and nations." Science Advisory
Board, U.S. Environmental Protection Agency, THE REPORT OF THE STRATEGIC OPTIONS
SUBCOMMITTEE, RELATIVE RISK REDUCTION PROJECT, SAB-EC-90-021C, at 5 (1990).
3. Since late 1989 when we started this book, environmental taxes have begun to
receive more careful consideration. In March 1990, the House Appropriations Committee
of the U.S. Congress held the first hearings on this subject. In August 1990, the Taxation
Committee of the Organization for Economic Cooperation and Development (OECD) had
the subject on its meeting agenda. In September 1990, the European Community Commission released a background study on economic and fiscal instruments in environmental
policy and made proposals for European Community policy in this area.
4. E.g., W. Baumol & W. Oates, THE THEORY OF ENVIRONMENTAL POLICY (2d ed.
1988); A. Freeman, R. Haveman & A. Kneese, THE ECONOMICS OF ENVIRONMENTAL
QUALITY (1973).
5. See S. Breyer, REGULATION AND ITS REFORM 270, (1982).
6. For an early description of a marketable permit system, see J. Dales, POLLUTION,
PROPERTY, AND PRICES (1968).
7. See A. Fredlaender, APPROACHES TO CONTROLLING AIR POLLUTION 199 (1982);
Spence & Weitzman, Regulatory Strategies for Pollution Control, in Fredlaender, CONTROLLING AIR POLLUTION 191.
8. Some of the difficulties stem from poor scientific understanding of the environmental "costs" and the diffuse nature and slow emergence of these costs. Although
economics can, in theory, fully account for environmental effects, significant methodological impediments exist. For example, in Science Advisory Board, U.S. Environmental
Protection Agency, REDUCING RISK, APPENDIX A: THE REPORT OF THE ECOLOGY AND
WELFARE SUBCOMMITTEE (1990), the subcommittee devoted a whole chapter to a critique
of standard economic analysis of ecological effects. The report questioned the use of
discount rates for future effects, criticized the use of the "willingness to pay" measure
of ecological values, and noted that ecological multiplier effects need to be counted in
any economic quantification. Id. at 28-36.
9. OECD, Issue Paper: Economic Instruments: Alternatives or Supplements to Regulations?, in ENVIRONMENT AND ECONOMICS 190 (1985).
10. Note, however, that in practice the members of the EC and other countries tolerate
and use tax subsidies without significant challenge.
11. Westin & Gaines, The Relationship of Federal Income Taxes to Toxic Waste: A
Selective Study, 16 B.C. ENV. AFF. L. REV. 753 (1989).
Environmental Fiscal Policy
Fiscal policy relating to the environment has not received any methodical attention on the part of the authorities responsible for environmental protection, nor
has it aroused any great interest on the part of the Ministry of Finance. The first
general theory and comprehensive inventory of measures dealing with the issue
date back to the start of the 1980s and were the work of researchers and academics
backed by the inquiry unit of the Ministry of the Environment.l It is true that
in France there was already familiarity with the work of the Organization for
Economic Cooperation and Development (OECD) on the "polluter pays"
principle2 and that economists had shown the potential advantages of recourse
to the known tools of economic policy, alongside and complementary to regulation.3 However, it remains true that it is only since 1989-90, with the success
of the Green party in the local elections of March 1989, that the zeal of the
other political parties for the environment has been stimulated, that a wideranging debate has developed, and that plans for a general tax for the environment
have been brought back on the drawing board.4
Fiscal measures relating to the environment are already quite developed in
France. We can identify a considerable number of taxes, often long established,
addressing a great variety of the issues. They play an essential role in dealing
with water and waste and are used against industrial plants responsible for
atmospheric and other forms of pollution. If the public authorities have not acted
on the basis of precisely formulated doctrine, they have advanced pragmatically,
making public funds available accordingly as they have set up new agencies
responsible for water preservation (1964), waste elimination (1975), and air
quality (1980), or have intervened in new areas (such as pollution around airports
in 1973). It is possible, as of now, to draw some lessons from the functioning
of these agencies. If they have not all been a success, some of them are still
unquestionably worthy of being retained, and perhaps even of being copied.
PUBLIC FUNDS AND THE ENVIRONMENT: AN
ATTEMPTED DEFINITION OF AN ENVIRONMENTAL
The early, essentially economic conceptions of an environmental fiscal policy
stuck to a fairly narrow definition. Only taxes whose revenue was directly intended for use in the fight against pollution—that is, taxes that by their nature
and by the basis used for their calculation were directly linked to a particular
activity or phenomenon deemed to be detrimental to the environment and that
were supposed to affect the behavior of the economic agents, redirecting it so
as to be more in harmony with ecology—were judged to merit such an appellation. Environmental taxation thus stood out from overall fiscal policy both
because of technical reasons (the basis used for its calculation was not a monetary
quantity, but a specific measure representing a particular degree of pollution)
and because its aim was interventionist, rather than financial. This does not
correspond to the theory of the "polluter pays*' principle as outlined in the 1972
recommendations of the OECD, which stipulate merely that the polluter must
be made to bear the costs incurred by the public authorities in fighting the
pollution. If behind this position we can identify the theory of externalities and
the will to integrate the social costs of the pollution into the production costs of
the goods generating the pollution, we still cannot point to a requirement for
any rigorous estimation of costs. Such a narrow definition has not appeared to
us to be pertinent either for analyzing the French situation or for affording the
instruments needed by political decision makers.
Fiscal policy for the environment, a branch of fiscal law, can have no basis
other than that given to environmental law itself.5 The environment has no reality
in itself; it is a legal notion that has a variable content. Article 14 of the July
10, 1976 Protection of Nature Act stated the objectives of environmental legislation in the following terms:
The protection of landscape and natural habitat, the preservation of the different species
offloraand fauna, the maintenance of the biological equilibrium to which this legislation
contributes, the protection of natural resources against the different causes of deterioration
which threaten them, all these are aims upholding the general interest.
However, not all of the provisions dealing with the areas mentioned here are
part of environmental legislation. We could not contend that the regulations
governing maritime or inland waterways navigation form part of environmental
law because they concern the utilization of water or that the legislation concerning
town planning is essentially an aspect of environmental law because it is an
instance of the utilization of space. The environment, in law, exists only as a
concept whose utility is functional. Legislation pertaining to the environment
has as its specific object the protection and management of certain collective
goods held to be useful to human life. The function of environmental law is
therefore the achievement of a policy that will ensure the preservation and the
management of ecosystems, of living organisms and resources. The environment
cannot have any legal status apart from a reference to human activities and to
the relations between humans and the world that surrounds them. This body of
law is therefore intended to enable the public authorities to intervene to modify
human behavior relative to what is deemed to be part of the public good, whose
optimum use is not guaranteed through the laws of the market and through the
spontaneous attitudes of producers and consumers. As a consequence, the notion
of environmental fiscal measures will cover all forms of taxation that contribute
to the above-mentioned finality and that are the instruments of a policy aiming
to preserve the totality of public goods that law regards, at a given moment in
time, as "the environment."
The indicators pointing to such a use of taxation will most likely be discernible
in the regulating principles of the tax. Thefirstof these principles is the allocation
of the revenue of the tax. Any tax that is funding the budget of an agency
specifically charged with the protection of the environment or that, within the
budget of a general-purpose public authority, is intended to cover expenditures
arising out of such duties is to be regarded as an environmental fiscal measure.
In this first category we may, for example, include the license fees collected by
the Financial Agency of a River Catchment-Area or the tax collected by the
Clean Air Agency; the second category will include taxes and fees levied by
local authorities for the removal and disposal of waste and taxes raised by the
state to offset the costs of carrying out checks on potentially dangerous plants.
Alongside this financial and budgetary objective, a further indicator is the
interventionist spirit of the tax. The tax is intended, both through its existence
and/or through the amount due, to affect the behavior of economic agents,
dissuading them from engaging in a pollution-generating form of activity by
inciting them to opt for activities respectful of the environment or by granting
compensation to those who have suffered environmentally undesirable effects.
This interventionist aim is generally stated by the public authorities, but it must
also be given formulation in the regulating principles of the tax. Thus, we may
remark that environmental fiscal measures will frequently present a certain number of traits that are little used in or that depart from the general principles of
the fiscal code. Thus, the basis of calculation for the tax can be a physical value
or unit, and not a monetary unit, that is estimated according to the quantity or
level of pollution (a quantity of sulfur monoxide or carbon monoxide, the volume
of waste, etc). It is this quantity or degree that will enable the calculation of the
amount due. Similarly, when a fiscal advantage is granted specifically for plants
reducing levels of toxic discharge, we will not hesitate to speak about environmental fiscal measures.
The two purposes of environmental fiscal measures—the budgetary function
of covering expenses relating to environmental protection and the interventionist
function of influencing the behavior of consumers or producers in relation to the
environment—often exist concomitantly and as mutually supportive aims. The
financial system putting into practice the "polluter pays" principle is an excellent
example of this. To restrict environmental fiscal policy to tax measures that fulfill
these two purposes is, however, to our mind to adopt a very reductive and
unproductive view on the question.
The proposed definition that environmental taxation is to support any environmental protection policy can involve difficulties concerning its application.
Certain taxes have their product allocated for a variety of uses, not all of which
operate in the interests of the environment, with the result that the qualification
of a particular tax as environmental may give rise to discussion. The criterion
adopted (financing environmental policies, influencing pollution producers, or
compensating victims) does enable us to make the evaluation clearly. Thus, the
sum due to a local authority when a real estate developer exceeds a certain ratio
between the constructed surface area and the overall area of the plot or erects a
building whose height exceeds the prevailing norms could be used by local
authorities to create parks and playgrounds, but it could also serve to finance
local housing authority schemes or the restoration of run-down buildings. As a
result, the tax functions less as an instrument of environmental policy than as
an instrument of town-planning policy. The 1983 statutory budget guidelines
eliminated the possibility of making such allocations. Similarly, the tax on
temporary residences levied by the local authorities in certain tourist resorts
could be integrated into the overall investment budget of the authority (for parks,
refurbishment of amenities, etc.), but it could also be used to promote tourism
or to solve problems related to road traffic. As such, it operates merely as a
supplementary source of revenue in the local budget.
THE DIVERSITY OF THE PUBLIC FUNDS ALLOCATED
FOR ENVIRONMENTAL POLICIES
We must not limit our attention to environmental fiscal measures. If we wish
to give a complete and realistic picture of existing law, we must go beyond the
notion of taxation and consider the total panoply of public revenue measures,
all of which can potentially be used as part of environmental policy. The public
authorities often have the choice between different funds that vary only in terms
of their particular regulating principle within the fiscal code, and not in any
substantive ways. Each country has in this area its particular, more or less
arbitrary system of classifications.
Let us first examine the general fiscal system, made up of taxes instituted by
the legislative assemblies, usually in line with the proposals of the government,
by virtue of article 34 of the constitution which empowers the Parliament to
establish all forms of taxation and to fix their regulating principles. These principles are governed by the General Code of Taxes (Code General des Impots
[CGI]), and the taxes are administered by the General Department of Taxes with
its external services, the regional and the departmental (the traditional French
unit of state administration) offices, along with local tax offices, or else by the
General Service of Customs and Indirect Duties. The Ministry of Finance has
shown scant enthusiasm about the use of thefiscalinstrument for the environment.
A strong awareness of ecology is something alien to the outlook of its top officials.
Furthermore, this ministry has generally manisfested hostility toward taxes specifically levied in favor of autonomous agencies outside its control. It loathes
tax abatements, which complicate legislation and reduce revenue, and only resigns itself to such an eventuality if subject to particularly strong political pressure. Until now, such pressure did not exist in relation to the environment or,
when it did, immediately came up against a strong and even better organized
opposition. Faced with the Ministry of Finance, the Ministry of the Environment
has neither the political clout nor the bureaucratic influence within the central
administration to enable it to impose its plans.
The major national taxes—the value-added tax (VAT), income tax, corporate
tax, capital gains tax, wealth tax, and death duties—cannot easily be used in
favor of the environment. By virtue of a fundamental principle of French fiscal
law, these taxes cannot be allocated to specifically designated expenditures.
VAT is subject to the directives of the European Economic Community concerning the harmonization of taxes on turnover. This leaves little latitude to the
legislatures in the different member states. It is true that there has been a proposal
to modulate the rate of the VAT on certain products according to the degree of
their harmfulness to the environment, as, for example, in the case of agricultural
fertilizers. But in addition to the stated opposition of the agricultural lobby to
such an initiative, the effectiveness of such measures is by no means certain
because of the very mechanics of the VAT. This is so because the VAT borne
by production costs can be deducted from the VAT that is then recouped on
sales, a system that effectively neutralizes any surtax levied on fertilizers.
Income taxes and taxes on corporate profits are also little used for environmental purposes. The fundamental principles of these taxes allow one to deduct,
under the heading of overhead or amortizements, expenses incurred by companies
attempting to reduce environmental nuisance factors, whether through research
costs, capital expenditures, or expenses for payroll or supplies. This can account
for a considerable sum in certain sectors of industry such as chemicals, petrochemicals, and heavy metals. The General Tax Code (CGI) affords companies
the right to a special amortizement for constructing orfinancingplants intended
either to treat industrial waste water, in accordance with the December 16, 1964
Water Act (art. 39, E of the CGI), or to deal with atmospheric pollution and
smells (art. 39, F of the CGI). When construction of such a plant is completed,
the company is entitled to proceed with a special 100 percent amortizement of
the cost. These provisions are of a temporary nature, but have each time been
re-enacted on the expiration of the period of validity fixed by law. Expenses
intended to save energy and raw materials also receive advantageous treatment.
Energy-saving equipment included in the list drawn up by the Ministry of Finance
and by the Industry Ministry can be amortized in line with the mechanism of
decreasing amortizement, with rates that are above the normal amortizement
rates (art. 30AA, 2 of the CGI). The measure essentially covers equipment
intended to recover energy, systems enabling the combined production of heat
and power, fuel-consuming appliances and systems with improved energy yields,
and technologies harnassing or using energy sources other than electricity and
fossil fuels. The same benefits are granted for equipment used in energy-saving
initiatives that comply with state standards. Initiatives of this nature have, furthermore, benefited from the financial aid of the state within the framework of
the provisions for aid in the financing of energy-saving investments. Finally,
equipment intended to save raw materials that are listed by the Ministries of
Finance and Industry (metals, basic chemicals, wood and its by products, textiles
and leathers, plastics, and rubber) also benefit from the provisions of these
measures (art. 39AA, 3 of the CGI).
That these last measures are to be considered elements of general economic
policy is borne out by the conditions attached to the last-mentioned advantage:
"the benefit of this provision is reserved for equipment used in operations which
allow for the economizing of raw materials, thus contributing to the equilibrium
of the balance of payments." This is one of the instances where the interests of
the economy and those of the environment clearly coincide. However, in France,
as in all Western countries, concern for saving energy and recycling waned
considerably in the mid-eighties with the sharp fall in the price of oil. The 1991
budgetary legislation marks a return to these concerns and envisages various
Taxes on income or on corporate profits can also be allocated for the environment by granting deductions for gifts made to associations and public interest
organizations, such as associations for the protection of the environment, or by
sponsoring initiatives in favor of the environment. We shall give some examples
of these below. However, we must emphasize that all this is quite marginal.
The one national tax that could be oriented toward environmental ends is the
domestic tax on petroleum products, which realized about 131 billion francs in
1990. This revenue is constantly increasing, both through inflation and through
the steady demand for petroleum products. But even if that tax constitutes an
extremely large part of the final cost of oil products, and especially of the cost
of petrol for motor vehicles, this does not amount to an environmental policy
tool. It is simply a convenience for the national budget, which can thus generate
revenue that is both abundant and easy to collect. Insofar as there has been a
specific policy in relation to these products from the mid-seventies onward, it
has been purely for economic reasons and has been aimed at limiting imports
and their effects on the balance of payments. Yet the public authorities have
consented to a slight effort by attenuating the tax on lead-free petrol, which,
thanks to this modest tax reduction, has a selling price that is about forty centimes
per liter below the price of high-grade petrol.
Taxes that serve to finance the local authorities (the commune, which, whether
urban or rural, is the smallest French territorial administrative unit; the departement; and the region) are also little used for environmental purposes, even though
they could potentially be more actively used for these ends.6
Communes, the districts made up of groups of adjacent communes, departements, and regions have at their disposal four different taxes for which each
local authority votes a rate. These taxes are added together, thus enabling the
calculation of the amount due by each taxpayer. About half the revenue is
generated by a company tax payable by businesses and by the self-employed,
other than farmers. Its basis for evaluation consists of 18 percent of the payroll
bill paid out by the firm in the second year prior to the fiscal year in question,
or, alternatively, for some small taxpayers, the base consists of one-tenth of the
professional income. To this must be added an amount calculated as approximately one-sixth of fixed capital asset value (company equipment and machines),
a sum that is supposed to represent the income they are able to generate.
This tax could be adapted toward environmental ends by levying a surtax on
polluting companies and by enabling companies to deduct and to offset, for the
calculation of the basis on which one is liable for taxation, that portion of the
plant that is used for depollution or that is beneficial to the environment. The
law grants a further one-third abatement of the taxable base for plants used to
treat industrial waste water and to fight atmospheric pollution and smells when
the plant in question already qualifies for the special amortizement allowed in
the GTC, referred to above. Nuclear power plants and airports are entitled to
this one-third abatement since their particularly high cost would have produced
a disproportionate taxable base. The reduction in annual payments that results
from this mechanism can be calculated at between 1 and 2.5 percent of the cost.
Its effect is thus far more marginal than the special 100 percent amortizement.
We should note, nonetheless, that whereas this last-mentioned measure is effective only if the firm makes a profit, the reduction in local tax affects the actual
costs borne by the firm and is of a permanent nature.
The local company tax operates according to a logic that is in essence rather
antienvironmental since local authorities are anxious to attract to their area companies that, through their payment of taxes, will benefit the local budget. Local
authorities thus put forth greater effort to set up an industrial estate than to
preserve an undeveloped natural expanse. Local representatives have frequently
supported the setting up in their area of plants that are reputed to be harmful to
the environment, and sometimes even to public health, and that have been
vigorously opposed by environmental associations. The success of the program
for the construction of nuclear power plants has been due to cooperation between
the highly centralized policy conducted by the French Electricity Authority
(EDF), which enjoys the unflinching support of the Ministry of Industry and of
the local political milieu, which has agreed to the setting up of energy plants
that are a major source of local fiscal revenue. The system has been perfected
thanks to the mechanism known as local company tax adjustment, through which
the local authority area in which the plant is actually set up receives only the
statutory maximum amount of tax, while the remainder is distributed among the
adjacent local authorities liable to suffer undesirable neighborhood effects and
disadvantages as a result of the existence of the plant.
A habitation tax is payable by all persons and organizations that occupy
property for residential purposes, whether as owner-occupiers or as tenants. The
taxable basis is supposed to represent the income potentially generated by the
building and is calculated by the local taxation office according to a series of
particularly complex mechanisms. Assessment takes account of the surface area
of the dwelling, its quality, its state of upkeep, the existence or not of the usual
modern conveniences, and also its location. This last item, which can affect the
taxable basis by as much as 40 percent, takes into account the existence of
communal amenities, transport, and shops and the quality of the neighborhood,
as well as the existence of clear, open areas surrounding the dwelling, the quality
of the view, access to sunshine, and the presence or not of environmental
The July 30, 1990 Act, which generally revised the mode of assessment of
property used in the evaluation of direct local taxes, modifies the general principles of calculation. Article 4 allows for augmenting the taxable base by a factor
of 1.1 or 1.15, or alternately for reducing the taxable base by a factor of 0.85
or 0.9, to take into account the particular situation of the property within the
area where it is assessed—that is, within a group of communes or within part
of a commune deemed to be part of a uniform local market for property leasing.
The maximum band of variation is thus 30 percent. It is hoped that, unlike what
has prevailed in the past, the fiscal administration will pay attention to this
indicator and revise it periodically to take into account changes that may intervene
in the environment of a particular property.
Thus, a good-quality environment increases the taxable base, whereas environmental deterioration decreases it. This state of things is not the expression
of a policy, but merely the consequence of fiscal realism: A building located in
a very pleasant area has a higher value, and its tenants are usually people who
are better off than those who live in a run-down neighborhood. The effect of
these measures is ambivalent. If they do offer fiscal compensation, in the form
of a tax reduction, to people living in an unappealing environment, they also
"penalize" those living in a preserved environment.
The developed land tax has, in the case of residential property, the same fiscal
basis as the habitation tax, the difference being that the former is payable by
the real estate proprietor. The remarks made above therefore apply to this tax
also. In the case of buildings serving a commercial or industrial purpose, the
base for taxation is identical to that adopted for the local company tax. The
developed land tax could be used much more actively to support environmental
policies since its effects are precisely those that result from the mode of evaluation
of the taxable base—effects that, for the moment, are modest. We may add that
since the January 10, 1980 law modifying direct local taxation, the communes
may tax pylons carrying power lines when the voltage exceeds 200 kilo volts.
The amount of this tax is revised annually in proportion to the variation in the
revenue of the developed land tax realized nationwide. This measure compensates
communes for the undesirable effects of the passage of high-voltage wires. The
revenue is not specifically allocated for environmental protection initiatives, but
rather is added to the general budget of the commune. Parliament has thus acceded
to a demand of local representatives, while at the same time involving them
financially in the matter of the passage of high-voltage lines and thus defusing
hostility toward the exorbitant right of the EDF to install its power lines wherever
The non-developed land tax is the local tax having the most complex relationship with the environment.7 Its taxable base is a value calculated by the tax
administration, which is supposed to represent the income that the proprietor
may earn from the land in one year. Prior to the above-mentioned July 30, 1990
law, land was classified into thirteen groups, which could then be further divided
into subgroups, in order to take account of the various uses to which land might
be put. The 1990 law makes a slight modification in the regulating principles
of the tax and stipulates that assessment is to be made by applying a rate to the
surface area and by taking account of the classification of the land into one of
seven groups, which have further subgroups. The first group comprises arable
or pasture land; the second, lakes, ponds, and all other water-covered areas; the
third, vineyards; the fourth, land used for fruit growing; the fifth, wooded areas;
the sixth, roads and other lands belonging to commercial or industrial plants;
and seventh, all other grounds. This tax is largely used as an instrument of
interventionist policy for economic purposes, whereas the legislature and the
fiscal administration are indifferent to the ecological interest of the different
classes of land. Article 1395 of the CGI exonerates the following categories of
land from the tax:
• lands sown, planted, or replanted for trees during the first thirty years
• reclaimed marshes during the first twenty years after reclamation
• lands uncultivated or lying fallow for fifteen years that are planted with fruit trees or
are used for crops during the first ten years after clearing or plantation.
The effects of these provisions are perverse. Land that is left in its primitive
natural state, and that therefore produces no revenue, is nonetheless assessed as
having a certain value. The owner is liable for payment of an annual tax, which,
however modest, will appear heavy to the owner who must acquit it. The owner
is therefore inexorably drawn to cultivate the land, or to have it cultivated, since
he will then be entitled to long-term tax exoneration and, naturally, to the income
it will generate. The phenomenon has been clearly analyzed in a study that shows
that even forestation is not necessarily in the interest of the environment insofar
as proprietors tend to choose tree varieties for their economic yield, rather than
for their ecological interest.8
The fiscal administration accentuates this built-in indifference of the tax to
the ecological conditions of the development of rural areas. Its records carry a
large percentage of errors, which means that its fiscal classifications do not
correspond to the actual uses of the soil. Notification about changes in the nature
of the plants grown is to a considerable degree affected by fraud and is poorly
checked, thus leading to a reduction in the tax revenue. Income available to the
proprietor is correspondingly improved. It has been demonstrated that an increase
in the land area farmed or cultivated results in a drop in the proprietor's tax
burden. He clearly has an incentive to put the maximum area of his lands into
But the same study, paradoxically, shows that farmers are, for the most part,
unresponsive to the fiscal aspect of the management of rural areas, despite their
customary protests about a tax system judged to be excessive. No doubt the
explanation for this lies in the fact that the very mechanism of the tax is not
widely known and is not perceived by the taxpayer as a factor that he can integrate
into his strategy. Furthermore, the amount due is never objectively very onerous
and is thus regarded as one operating cost among many. Whatever else we may
say about what is a fairly confused situation, there is one certainty: The land
tax is not used for environmental purposes, and its incentive is to maximize
cultivation of land, rather than to adopt a "softer'' approach.
This brief overview of the general tax system shows that it either is not
technically adapted to the requirements of an environmentalist policy or misapprehends such a policy to the point of producing environmentally undesirable
Can we then say that the solution resides in specific taxes? The environmental
fiscal system is made up primarily of taxes that have a specific purpose, and
whose underlying principles are often in derogation of general fiscal principles.
Its essential goal is the financing of a particular service whose duties are the
task of environmental protection or management, the fight against what is environmentally detrimental, and compensation for the latter's effects. The necessary resources must be found. Instead of diverting a part of general tax revenue,
it has been deemed more convenient to establish new taxes which, through their
mode of assessment and collection, are adapted to their environmental objectives.
While some of these specific taxes respect principles close to those of general
taxation, many obey a logic that is sui generis, often a marked exception to the
general code.
In the first category, which is numerically less important, we may place taxes
that abide by general fiscal principles as laid out in the General Tax Code and
that are subject to the provisions of the Book of Fiscal Procedure, which spells
out the former. These taxes are instituted by law, which lays down their main
rules; the government may further specify rules either by decree or by ministerial
order. They are put into application by the fiscal administration, no matter what
territorial authority may be their beneficiary, and all disputes concerning them
are to be settled in accordance with the general regulations concerning fiscal
contentions laid down in the Book of Fiscal Procedures.
The most representative example of this category is the domestic wastedisposal tax. It can be instituted by either one commune or a group of communes
whenever they are collectively responsible for waste disposal. The tax is payable
on all property subject to the developed land tax and is calculated according to
the potential net income used as the basis for the calculation of the developed
land tax. The rules governing its administration and any disputes concerning it
are those of the developed land tax (arts. 1520 to 1526 of the CGI).
We may also mention the tax on forest clearance regulated by the CGI (arts.
1011, 1723 ter A, 1840 N quinquies) and the Rural Code (arts. L 314-1 to L
314-14). It already involves certain particularities insofar as the declarations are
registered by the agricultural administration of the departement, though the tax
is collected by the commissioners of the General Tax Office.
The number of sui generis taxes is quite considerable. Some analysts regard
them as quasi-fiscal taxes in order to distinguish them from the above-mentioned
taxes and from the parafiscal taxes we shall deal with below. Their common
feature is that they are in fact taxes, and, as such, they require a decision of the
Parliament. However, Parliament defines their governing principles without reference to those of the CGI, usually because management of these taxes is conferred on a specific agency, and not the normal fiscal administration of the state.
The regulating principles are in each instance particular to the tax in question
since the legislator deems himself to be at liberty in his choices. We shall examine
a few examples below, among which we may cite license fees to cover charges
for the verification of nuclear plants, taxes payable by plants subject to environmental protection monitoring, pollution license fees levied by catchment
authorities, and fees for the protection of sensitive nature areas. These taxes
have in common the fact of having been devised essentially to generate funds
for the financing of specific actions, rather than to have an intentional interventionist effect on the behavior of economic agents.
Finally, the third category is made up of parafiscal taxes, a notion specific to
French fiscal law.9 Article 4 of the January 2, 1959 Act, which outlines the
framework of budgetary legislation, defines them as taxes levied for either economic or social ends to benefit an organization of private law or an industrial
and commercial public agency that is instituted for a specific purpose (in contrast
with the general-purpose nature of the territorial authorities) and whose financial
and accounting structure reproduces that of private companies. These agencies
are, furthermore, to a large degree subject to private law, rather than to the law
regulating public bodies.
Jurisprudence, whether of the Conseil Constitutionnel or of the Conseil
d'Etat—which is the supreme jurisdictive body of administrative law—has interpreted the notion of economic or social interest in a fairly broad sense, by
including within it objectives of culture and professional training.10 The 1959
law sets out a minimum of guidelines: Parafiscal taxes are established through
a decree of the prime minister, who has authority to fix their regulating principles.
Their collection beyond December 31 of the year of their institution requires
their registration on a list that is attached as a supplement to the budgetary
provisions act, thus guaranteeing a degree of parliamentary control.
The government has itself further specified the status of these taxes by a decree
of October 30, 1980, whose main innovation is to set a five-year limit on the
validity of a new tax; beyond this, a clear decision to renew the measure is
required. The chief interest of these taxes is the fact that they can be instituted
by decision of the government, which lays down not only their regulating principles, but also the detailed conditions governing the use of the funds raised.
This is often the result of a compromise arrived at between the state and those
representing economic or social interests. The decree through which a parafiscal
tax is set up has therefore an objective going beyond the mere creation of a new
source of revenue: It often comprises the essential financial basis and status of
an interventionist body, whose mode of operation has resulted from negotiations
between the public authorities and the socioeconomic group concerned.
These possibilities have been used in the pursuit of environmental policies.
A first parafiscal tax was set up in 1973 for the benefit of the public authority
constituted as Paris Airport. The levy created was intended to cover the various
expenses incurred in the fight to reduce noise levels around the airports of the
Paris region. It was abolished in circumstances we shall detail further on. Similarly, since the end of the 1970s, the National Agency for the Recovery and
the Elimination of Waste levies a parafiscal tax whose regulating principles were
several times subsequently modified in order to finance the disposal of waste
oils. A decree of June 7, 1985, which was renewed in 1990, set up a parafiscal
tax on atmospheric pollution levied by the Clean Air Agency; the resulting
revenue is used mostly to subsidize pollution-prevention investments intended
to reduce the pollution levels of firms emitting large quantities of sulfuric oxide.
Numerous proposals for the establishment of such parafiscal taxes, on packaging notably, have not materialized (report by Michel Barnier, parliamentary
representative, "Green Plan" of Environment Minister B. Lalonde in note 4).
It is true that the Ministry of Finance is not very favorable to this form of
taxation; its administration for the most part escapes the control of its services,
and it confers on the agencies to which its product is allocated a considerable
degree of autonomy, despite the numerous controls to which they are subject.
Disputes concerning these taxes are resolved by the administrative jurisdiction,
which can receive a plea for the annulment of the decree instituting the tax or
the agency that benefits from it, as well as any litigation arising from its
Finally, beyond this framework of statutory levies, we must consider the
question of the pricing of public services. Financial language here resorts to a
number of expressions: remuneration for a service rendered, license fee, price.
The jurisprudence of both the Constitutional Council and the Conseil d'Etat
have given identical definitions. Price is the direct counterpart paid by the user
of a public service or public amenity for the use of this service or amenity."
The main legal consequence stemming from this notion of remuneration for a
service rendered is that its institution does not require a law, but rather is
authorized by an administrative authority: a decree by the prime minister in the
case of the state, and the deliberations of the assembly in the case of a local
authority or public body. Remuneration thus escapes the mechanisms of financial
management and the procedures for contention, which have been laid down in
the case of taxes. It requires, by definition, the existence of a public service
providing benefits for users.
In the field of environment, this implies that a public agency has established
a service or amenity that can be used by the public, who are required to pay a
corresponding price. The examples of this are numerous. Communes or groups
of communes operating a public service for the collection and treatment of sewage
can claim a purification fee, calculated on the volume of water consumed by
users. This service must, furthermore, be operated as a service of an industrial
or commercial nature and must balance its costs through the revenue collected
Communes can institute a fee on the removal of domestic waste. Fees are
supposed to be proportional to services rendered, an aim that in practice is difficult
to achieve.12 Communes can also demand payment of a fee when they remove
and treat corporate waste that has characteristics other than those of household
waste and that they have no statutory obligation to collect. Charges are generally
fixed according to a flat rate, or in rather approximate fashion. The small number
of those liable for such a charge and the amounts involved make this a profitable
Experience has, however, demonstrated the ambiguity of the system. The
levying of a charge can turn out to have a dissuasive effect on polluters, who
may be tempted to evade it through the uncontrolled disposal of their waste. A
waste-disposal service—financed through taxation, but free for the user—might,
by contrast, attract a greater number of users. This explains why the Servant
Report (Paris, La Doc. Franc. 1984), commissioned by the Ministry of the
Environment, did not adopt a clear position on the question of who should bear
the financial burden of the elimination of small volumes of waste: the producer,
the state, or the local authorities? It nonetheless stated its preference for the
levying of a single tax on industrial waste whose rate would vary according to
the degree of toxicity; the beneficiary of this would be the state. That appeared
to be at once the simplest, fairest, and most secure solution.
Michel Barnier, a member of Parliament, proposed, in his report to the
National Assembly published in 1990, the creation of interregional agencies,
operating on the principles of a mutual benefit organization. Their funds would
be constituted through "fees charged for toxic waste and by the contributions
of users and of local authorities which would be calculated according to the
nature and the volume of the products dispatched for dumping or for treatment.''
Barnier, though a member of a parliamentary group showing no eagerness to
increase the level of fiscal and statutory national contributions, is thus proposing
the creation of about six new taxes in different fields.
Taxes for Inspectorates
Fees to offset the costs of checks on firms presenting an environmental risk
demonstrate an interesting use of fiscal policy. Checks concerning compliance
with environmental regulations are the responsibility of a number of services.
Administrative, municipal, and prefectoral authorities, as well as police departments, can establish the existence of infringements and can, if it proves necessary,
notify the competent judicial body. All concerned parties, including environmental defense associations, some of which have been certified to represent the
general interest of the environment by the administration, are equally free to file
complaints and so enjoy an enlarged capacity for action.
It is nonetheless important that there be specialized control bodies, able to
ensure the systematic supervision of certain firms presenting particular risks and
able to initiate preventive measures or sanctions. The creation of such unspectacular, low-profile bodies is rarely seen as a budgetary priority. In France, this
has been possible only when specific receipts have covered the operating costs
The state has the option of resorting to a technique widely used in other areas
(the verification of drugs, meat, and certain types of equipment), which consists
of charging firms needing special control to defray the costs. It is easy to justify
to the public and to the Parliament the introduction of such taxes, the burden of
which firms can pass on to their consumers. The administration sometimes
presents these sums as payment for services rendered, but they really qualify as
taxes since the safety controls are not services rendered to those who are subjected
to them, but rather are activities carried out in the interest of third parties and
not of the firms that must submit to them.13
The oldest of these fees are the fees due by "classified firms" subject to
special legislation enacted in 1917 and modified in 1976. Their regulating principles are the result of a series of reforms, all of which have aimed to improve
their financial yield in order to pay a sufficiently large professional control team.
The December 19, 1917 law relative to dangerous, insalubrious, or incommodious establishments had provided that these establishments should bear the
costs of the checks they obliged the administration to make. If any special
examination and inquiry measures were ordained by the minister, "the refunding
of costs occasioned by these measures could, if need be, be demanded of the
industrialist. These costs are to be collected as in the case of direct taxation"
(art. 30). For want of political will and the requisite qualified staff, the measure
A governmental order of September 24, 1958, was intended to reactivate the
procedure in order to generate funds to pay inspectors chosen from state agents
and paid according to an allowance system. It remained a dead letter.
The procedure was again taken up in the Budget Provisions Act for 1968. In
the National Assembly, the reform gave rise to quite an amount of controversy.
Representatives admitted the need for a qualified staff, but feared that new taxes
would increase the burden on firms. Article 87 of the December 21, 1967 law,
(1968 Budget Provisions Act), specified by a decree of September 5, 1968,
nevertheless reiterates that expenses incurred in the control of firms are to be
borne by these firms, in the form of annual taxes at a moderate rate (100 or 300
F). Special inquiry measures ordered by the minister could also give rise to the
refunding of costs.
In 1971, the minister of the environment, newly nominated, discovered that
the local services of the Ministry of Industry were unable to carry out the
collection of the tax, which was paid by little more than half those liable for
payment. The 200,000 establishments theoretically concerned by the measure
were not even listed in exhaustive fashion. Financial considerations finally made
the administration aware of the nonexistence of information mechanisms in a
field that it had a specific mission to check.
The Ministry of the Environment thus requested permission to recruit 260
engineers and technicians employed full-time after a period of five years. The
Ministry of Finance agreed on the conditions that the progression of the tax's
product be equal to the budgetary expenditure thus occasioned and that the annual
control fee be fixed by decree so as to increase it in line with needs. The
modifications to the Budgetary Provisions Act of December 24, 1971 (art. 12),
set up two distinct taxes.
First, all classified industrial and commercial establishments are liable for
payment of a single tax levied on their creation or their beginning operations
and payable at the moment of their authorization or registration. The rate was
fixed at 3,000 or 1,000 F, according to the different categories of firms. The
self-employed are granted a reduction. A penalty equal to twice the amount of
the tax is imposed on any operator either failing to give the required information
or making an inexact declaration. The Budgetary Provisions Act for 1990 (art.
119) increases this rate to 10,000 F solely in the case of establishments requiring
prior administrative authorization (about 58,000) to 2,000 F for small traders
employing no more than two employees, and to 4,800 F for other small
Furthermore, an annual licensing fee is levied on establishments that by virtue
of either the nature or the volume of their activities are a potential source of
particular environmental risk and that, because of this, require periodic and
thorough controls. This class comprises a little over 4,000 establishments engaged in one or more activities on a list drawn up by decree. This fee is equal
to the amount of a basic tax fixed at 500 F to which is applied a factor of from
1 to 10 since the 1990 Budgetary Provisions Act, according to the gravity of
the potential environmental risks presented by the establishment. A decree issued
December 29, 1972, and modified many times since then, listed the activities
liable for the payment of the annual fee and also the factor to be applied for
each category. The July 19, 1976, law "Relative to Plants Classified for the
Protection of the Environment" (art. 17) makes only secondary modifications,
while the December 30, 1989 law (1990 Budget Provisions Act) modifies the
rates as indicated above. Collection of the single tax and of the annual fee is
carried out as in the case of direct taxation.
In 1989, there were a total of 554 classified plant inspectors compared to 402
in 1981 and 497 in 1982. Even if they do not devote the whole of their time to
the task of carrying out controls, the progress is nonetheless obvious.
Operators of basic nuclear plants are liable for a fee whose regulating principles, both complex and detailed, were included in the December 27, 1975
modifications to the Budgetary Provisions Act. For each type of basic nuclear
plant (reactors for energy production, other types of reactors, particle accelerators, plants for storage, etc.), the scale provided for the payment of a certain
sum at each stage in the completion of the plant—the filing of an application,
the publication of the administrative authorization, and its coming into operation—and then annually. This scale is subject to periodic revision. The amount
payable for each type of plant is decided by the minister of industry on the basis
of the report of head of the Central Service for the Safety of Nuclear Plants
(SCSIN), and its product is part of the resources of the Ministry of Industry and
The modalities of this fee were fixed by the May 24, 1976 decree. The sums
raised are used to defray the expenses of carrying out the safety measurements
that by convention have been entrusted to the Commission for Atomic Energy
(CEA), and occasionally to other agencies, and to cover the travel expenses and
the fees that the nuclear plant inspectors qualify for, along with the administrative
and operational costs of the service.
The main objective of this reform was to remove a burden from the budget
of the CEA, a national public agency. A decree of December 11, 1963, modified
on March 27, 1973, conferred upon the Ministry of Industry an essential role
in conducting inquiry procedures and in drawing up regulations concerning the
safety and control of nuclear plants. However, the SCSIN, an agency of this
ministry, but without the means to carry out these checks, had recourse to the
CEA, which was given the duty of "proposing measures of a nature to ensure
the protection of persons and goods against the effects of nuclear energy and of
contributing to their application" (September 29, 1970 decree).
The totality of CEA assignments was included in a research program financed
from its own budget by the "research endowment" of the state budget. Through
time, thisfinancingproved to be less and less adapted to reality since the progress
of the EDF program of nuclear power plant construction increased the workload
and the costs borne by the CEA. The latter considered that if the safety measurements corresponded to a duty of the public authorities, they also, in part,
took the form of services rendered to the operator, EDF. The government, on
its side, deemed that the development of nuclear energy was progressively involving more and more firms and industrial processes of a more modest dimension
and that it was reasonable to have them contribute to defray the costs arising
from safety measurements and technical controls.
Despite invocation of the notion of services rendered, the government and
Parliament were quite convinced that they were instituting taxes requiring a law.
Whereas the initial project referred to decrees for the fixing of the scale for
calculating fees, the law finally includes the entire set of rates governing the
fees. From 1977 onward, most of the rates were doubled, the objective being
to arrive at real price levels. In 1981, the progression reached 80 percent, thus
enabling the financing of an increasing part of the costs of safety measurements
carried out by the SCSIN of the Ministry of Industry and by the Institute for
Protection and Nuclear Safety of the CEA.
The enhanced safety resulting from the existence of these controls is obviously
also in the interest of the environment. It has probably also contributed to the
decreased hostility toward the program of nuclear-powered electricity generation.
Waste Treatment Policy
Financial principles governing waste treatment are complex and diverse. A
fairly satisfactory set of solutions has been put into practice for household waste
collection. The elimination of this waste, and even more so of industrial waste,
is, on the contrary, a source of formidable problems.
The collection of solid waste has traditionally been a responsibility of the
municipal services and developed in large towns toward the end of the nineteenth
century. Administrative judges have recognized since 1936 the legality of this
activity as a contribution to public health, another traditional responsibility of
the communes. Communes have operated the service in various ways, either
through a direct municipal agency or through contracts with private firms. From
1959 onward, there has been an increase in the number of national regulations
designed to achieve a more efficient organization of these services, which remain
non-compulsory for communes.
The July 15, 1975 law, relative to the elimination of waste and to the recovery
of materials, profoundly modifies the policy of the public authorities. Their
responsibility is no longer restricted to domestic waste, but is also extended to
cover all forms of waste, which the law generally defines in its first article. The
objective is not the collection, a necessary step, but rather the elimination of
waste, and a new concern emerges: the recovery of materials.
The administration has been given wide powers of control over the production
and commercialization of products susceptible to becoming waste. By virtue of
article 6 of the law, it may oblige producers, importers, and distributors of
products that generate waste, or elements contributing