Sustainability Targets and Tax Reform - Friends of the Earth's Agenda

30 July 2001

published in Environment Strategy Europe 1997

Friends of the Earth (FOE) Europe's 'Sustainable Europe' project was established in response to Agenda 21's realisation that environmentally sustainable development (or sustainability) requires radical changes in current patterns and levels of production and consumption. The project aims to establish concrete targets for achieving sustainability. Using the idea of 'environmental space', and a methodology developed by Germany's prestigious Wuppertal Institute, it sets targets as per capita consumption rates for key environmental resources such as energy and timber. These targets suggest the need for significant cuts in use of energy and virgin non-renewable resources over the coming decades (see table).

Examples of sustainability targets for Europe

More than 30 national groups have been working in European countries to establish such targets for each country, presented as the reductions necessary from current consumption rates. These groups have also begun to explore the practicality of meeting such targets, in consultation with government and business interests. Yet the most important phase of the project is just beginning, as we seek the formal adoption of sustainability targets by government and industry.

In this regard Denmark is leading the way, with the recent announcement of energy targets including an ambitious reduction in carbon dioxide emissions of 30 per cent by 2005, alongside an increase in the share of renewable energy from eight to 12 per cent over the same period.

But the establishment of targets is only one key recommendation to emerge from this project. In November 1995, the 'Sustainable Europe' conference, involving a wide range of business and other interests alongside Friends of the Earth and other NGOs, came to a remarkable consensus on the main policy initiatives needed at a European scale (see box).

Sustainable Europe Conference Recommendations

1.    Sustainability targets.

National and local authorities and international bodies should, after wide consultation and drawing on the best scientific evidence, set national sustainability targets for levels of consumption of environmental resources based on the global environmental space concept.

2.    Quality of Life

National authorities and international bodies like the EU should, after wide consultation, adopt and regularly publish indicators of sustainable economic welfare, incorporating measures of life and environmental quality, and use them to help guide fiscal, economic and social policy, and integrate such policy with environmental goals.

3.    Green tax reform and sustainable production
National governments should work, individually and together, to introduce an 'ecological' tax reform, preferably at a pan-European or EU level, increasing taxes on environmental resources (with appropriate compensation for the least well-off), using the revenue to reduce taxes on labour and to create new, environmentally sound job opportunities.

4.     Towards Global Cooperation and Solidarity

We must seek an equitable distribution of access to environmental space between North, South and East. All policies and operations of governments and international development agencies, including approaches to trade, aid, international debt and technology transfer, should take full account of quantified sustainability targets.

5. Pro-active and responsible business

Businesses should take voluntary action, with a long-term perspective, above and beyond regulation, to develop cleaner technologies, products and management practices and transmit them throughout the world, with the aim of meeting consumer needs within sustainable lifestyles.

6.    Public participation

Local, national and international authorities and communities must seek to empower all individuals and NGOs of all kinds to take a full role in local, national and international decision making processes.

This is not simply the wooly consensus of the Rio Earth Summit, but marks a real step forward. Business interests, as represented by Claude Fussler (of Dow Chemicals, and the World Business Council for Sustainable Development), recognised the desirability of a 'factor

10', or ten-fold, improvement in our efficiency of use of the environment (to allow for a 10- fold reduction in its exploitation). Scientific experts, such as Ernst von Weiszacker (of the Wuppertal Institute), said that such improvements are technically feasible. But, they said, without the work of FOE and other NGOs to change lifestyles and promote sustainable lifestyles and 'sufficiency' in consumption, Europeans would not be able to live within our 'environmental space'. All agreed that with the right policy framework we could achieve the changes needed with a minimum of economic and social disruption.

Tax Reform

At the top of the list for policy reform is the need for incremental tax reform to reduce taxes on social 'goods' and increase taxes on environmental 'bads', while ensuring that the reforms have no regressive impacts on the poorer groups in European society.

The latest modelling from Cambridge Econometrics suggests that in Britain a fiscally neutral package of tax reform focussed on increased energy and waste taxes, and reduced employment taxes could create over half a million additional jobs by 2005, with negligible effects on inflation and business profitability.

As a priority for both national governments and the European Union, such tax reform would provide a universal incentive for positive change. It would also be powerfully enabling for those businesses throughout Europe whose efforts to improve their environmental performance are frustrated by 'lowest-common denominator' competition from those who exploit underpriced environmental resources for the sake of competitive advantage.

The 'double-dividend' of extra jobs as well as a better environment, even if eroded eventually by increases in prices and wage rates, would provide a real political opportunity to reduce unemployment levels (especially if targeted at lower-paid jobs). Part of the revenue flows generated could fund uptake of environmentally-efficient technologies - Governments could target depreciation allowances, for example, at industry sectors which the increased taxes would otherwise particularly disadvantage.

Not just Europe

As the recommendations above make clear, we need concrete measures to ensure that sustainable development is a global phenomenon. The whole basis of targets set according to environmental space is to provide the 'headroom' for development in poor and deprived regions, and in particular in the South, in terms of access to a fair share of environmental resources, and the skills and technologies needed to use those resources to the benefit of their people, without degrading the global environmental commons.

Conclusion

European leaders happily agree on the need for environmental policy, but when it comes to binding agreements they are loath to take radical steps - often for fear of the economic consequences. The process started in 1993 by the Delors White Paper on Growth, Competitiveness and the Environment seems to have ground to a halt as a result of political

bickering over tax sovereignty, and unproven fears of businesses about the impacts of tax reform on their profitability. The real integration of environmental and economic policy - respecting environmental limits - must take its place at the top of European and national political agendas. Otherwise there is little hope for either environmental or economic sustainability.

Prepared by
Duncan McLaren (Research Coordinator, FOE England, Wales and Northern Ireland (EWNI) and Steering Committee Member, Sustainable Europe Project) and
Charles Secrett (Executive Director, FOE EWNI)