Published on Friday, January 14, 2022

Spain | Taxation as a climate action tool

Taxation is a key tool for climate action and helps society achieve its decarbonization goals. Environmental taxation in Spain needs far-reaching reform, with taxable activities and rates that reflect the true extent of the negative externalities to be corrected.

Key points

  • Key points:
  • Buildup in the atmosphere of greenhouse gases raises the temperature of the Earth and triggers climate change, with adverse effects on the environment and humanity.
  • A properly designed tax framework could introduce incentives to reduce greenhouse gas emissions and use cleaner energy sources and production methods. However, in the mid-1990s, environmental taxes were placed on the back burner in Europe. This trend was partly reversed after the 2008 economic crisis and, especially, after the 2013 reform of the EU emissions trading system (EU ETS).
  • In Spain, environmental taxation is distributed almost equally between business and households. In fact, the industries producing the highest carbon dioxide emissions do not pay the most environmental taxes, so it is doubtful whether taxes are effective in discouraging pollutant activities.
  • • Far-reaching reform of the environmental taxation framework is needed. There should be a small number of effective, transparent and streamlined taxes that are capable of correcting the negative externalities arising from greenhouse gas emissions.

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