Foreign experience in the application of economic mechanisms for regulating environmental externalities

Ivanov Maksim Olegovich ORCID: 0000-0003-2389-5524 Researcher, Financial Institute of the Ministry of Finance of the Russian Federation 125375, Russia, Moscow, lane. Nastasinsky, 3 page 2 maximiv@list.ru

Introduction

Tax mechanisms for reducing environmental harm: theoretical approaches. It is worth noting that the governments of most developed countries of the world prefer to regulate these environmental issues primarily through market mechanisms, which, in turn, encourage business representatives to direct their activities and production to ensure environmental safety and reduce the carbon footprint of products in an attempt to minimize costs.

Methods

This study examines relevant international practices and mechanisms for regulating environmental externalities based on relevant scientific literature, as well as the legislation of a number of foreign countries in order to identify global trends in the development of ESG regulation and identify legal and practical aspects suitable for implementation on the territory of the Russian Federation (RF).

Results

In a number of studies of such market mechanisms, domestic and foreign authors, for example, such as Helm D. and Pearce D. ^[1], Opshoor J.B. and Vos H. ^[2], R. Novikov and A. Bystrova ^[3], V. Sedov ^[4], A. Golub ^[5], K. Hoffman ^[6] and others – emphasize the importance of tax regulation for solving the tasks of economic and environmental state policy. At the same time, the instruments of tax regulation are rather used by states to identify only the relationship between the deductions of "polluting companies" and the environmental harm that such corporations bring.

The main instrument for regulating issues related to the negative impact on the environment is the so-called "environmental tax". Thus, the experience of the countries of the international economic unions – the EU and the OECD – shows that legal practice mainly considers such taxes as one of the main budget revenues in the form of payments from enterprises engaged in environmentally hazardous activities ^[7].

Emphasizing the importance of the role of state regulation of the issue of payment for environmental management, it is appropriate to note the approaches of A. Pigou and R. Coase to the so–called environmental externalities - economic mechanisms for regulating external effects and negative environmental consequences of economic activity of economic entities. According to A. Pigou ^[8], the presence of such effects is a sufficient reason for state intervention in the economic activities of the polluter. At the same time, according to the author's calculations, tax deductions should be calculated per unit of the pollutant and correspond to it, amounting to the sum of the marginal social costs ^[9]. A. Pigou suggested that the party causing harm and the party suffering from it are not able to agree among themselves for mutual benefit. As a result, A. Pigou concludes that there is a need for mandatory state intervention in solving problems of environmental externalities.

On the other hand, the key conclusions of R. Coase's research ^[10] formed a number of hypotheses about the low importance of state intervention in the tax regulation of the environmental aspect in the case of minimal costs, since, according to the author, entrepreneurs are quite capable of independently leveling emerging problems under the influence of external effects.

Researchers have noted the difficulties of fully implementing both the theory of A. Pigou (Gromov V.V. ^[11], Kuzmitskaya T.V. ^[12], Baumol W. and Oates W. ^[13]) and the ideas of R. Coase (Galenovich A.Yu. ^[14]). Despite the presence of a number of shortcomings, A. Pigou's theoretical approach is a more widespread tool in practice for solving environmental issues, using the state budgeting system as a mechanism for redistributing budget funds. At the same time, R. Coase's ideas were implemented in many programs to control emissions into the atmosphere and water areas, which partially formed common approaches to the organization of the environmental quota trading system ^[13-16].

Evolution of the application of environmental externalities. The analysis of foreign experience in the application of environmental externalities has revealed that a special position in it is occupied by taxes and the relevant points of legislation aimed at protecting the environment, which are classified in the documents of the European Union (EU) in the category of so-called "environmental taxes". According to the definition of the European Environmental Agency (European Environmental Agency), this type of tax revenue can be described as "payments towards the state, the basis of collection of which is a special negative impact on nature" ^[14].

It must be said that environmental taxes in one form or another exist in all countries. For example, their implementation in the form of contributions for the negative impact on the environment in Europe and America began in the 70s of the XX century, and the need to apply such legislative measures at the official level was first justified in the first The EU Environmental Action Program in 1973, which linked it to the principle of "polluter pays" ("polluter pays"). In the EU Recommendation of March 3, 1975, the main purpose of collecting pollution charges has already been defined as the creation of an expanded set of incentives for nature users in order for them to take economically beneficial and at the same time sufficient measures to reduce emissions into the environment. However, in case of non-compliance with the regulations, the nature user is obliged to compensate the expenses of state bodies for the restoration of spoiled environmental conditions.

It is worth noting that the attention and active research of this issue arose in the second half of the 80s of the XX century due to the active large-scale transition to the economic paradigm of state management of environmental protection. Thus, the course on tax regulation was taken as one of the key methods in the early 90s of the twentieth century. The conceptual basis of this approach was the idea: the development and promotion of environmental protection should be supported by a simultaneous reduction of the tax burden on income, which should potentially allow increasing the competitiveness of national production, as well as activities to reduce the negative impact on the environment (NWOS).

In the Scandinavian region of Europe, environmental taxes began to be applied in the 80s of the twentieth century - provided that their role in the volume of tax revenues increased by the mid–90s mainly due to the expansion of the EU.

In Central Europe, the peak of the development of environmental legislation occurred in the 1990s and early 2000s - at this time, key laws on the preservation of the atmosphere were being developed and adopted.

At the same time, in the OECD countries, environmental legislation, or the so-called "Green Tax Reform", began to develop in 1995-1996 ^[17]. So, in most of the countries of these unions, environmental taxes and legislation now have a significant effect on the preservation of nature.

Foreign environmental taxes. In the member countries of the Organization for Economic Cooperation and Development (OECD) a number of tax measures aimed at preserving the environment were implemented, namely: taxes were established on the use of natural resources, on the creation of waste, on noise, on pollution of water areas, on the production of carbon dioxide, sulfur and other environmentally hazardous substances. At the same time, it is the transport and energy types of tax deductions that have become the most widespread on the territory of the European Union, since in one way or another these types of fees are mandatory in almost all member countries of the association. It is also worth noting that transport and energy taxes are fiscal, that is, they are intended to replenish the budget of states, given that they have a positive effect, including on the preservation of nature ^[18].

An analysis of foreign experience in solving environmental protection issues revealed that if in Europe preference is given mainly to tax regulation of environmental externalities, then in the USA full-fledged measures have not been introduced to deter the discharge of environmentally hazardous substances. Nevertheless, at the level of the federal center, permits for nature use are still issued, the abuse of which is punishable by fines, while at the state level such permits are sold, which brings such interaction closer to the methods of tax regulation ^[19]. However, in this case, enterprises do not pay in proportion to the volumes discharged, but within the framework of a certain acquired quota, taking into account the market price of the substances discharged. The minimum order of prices for such quotas is determined by specialized environmental authorities, provided that this right to discharge substances can be resold taking into account market sentiment. 

In Canada, administrative fees are used for obtaining permits for emissions, payment for the use of resources ^[20].

In Asian countries, environmental protection is regulated through non-tax payments (China, Japan). At the same time, in recent years, China and Japan have been actively working on the design and implementation of solutions within the framework of "green" tax legislation ^[21] and other tools that are used by governments of other countries and the effectiveness of which has been confirmed by international organizations.

Classification of environmental taxes. According to the objectives of the introduction of environmental regulation of taxes, fees and payments applied abroad, these payments can be classified as follows:

? preventing and containing climate change;

? stimulating;

? fiscal;

? compensating environmental costs.

Thus, for example, tax levies that prevent and deter climate change were, in particular, introduced in Great Britain. Local The Government has identified the purpose of such fees in preventing climate change and reducing the formation of greenhouse gases. At the same time, in relation to energy-intensive industrial production, taxes can be reduced if a number of certain obligations are fulfilled to minimize energy costs over a ten-year period and if environmental standards are reviewed every two years. Similar commitments have already been made by the majority of capital- and energy-intensive industries in the aluminum, chemical, paper and other sectors of the economy of the United Kingdom ^[22].

The similarity of incentive taxes was introduced in In the UK in 1996 in the form of deductions for the disposal of harmful waste to stimulate entrepreneurs in the field of waste disposal. Thus, the object of taxation is the waste itself, disposed of at officially registered landfills. At the same time, the British Government also provided for appropriate tax deductions in cases where a company using landfills invests in environmental conservation projects. At the same time, in 2002, an aggregated tax was introduced in this country in order to reduce the consumption of sand, gravel and crushed stone. Due to the increase in the price, the extraction, transportation and use of these raw materials significantly negatively affects the state of the environment ^[22]. Also, in order to encourage enterprises to recycle and reuse waste, special payments were established in England and Northern Ireland for the use of landfills for the disposal of industrial waste ^[23], which are paid by enterprises that have their own landfills or use landfills of other economic entities. The collected funds are credited to a special fund to support landfill operators who use technologies and modern waste management practices. In the case of waste disposal at unorganized landfills for violation of environmental legislation, enterprises are obliged to pay not only a fine, but also a tax on waste disposal at established rates. In the case of sending the waste placed at the landfill for subsequent processing or reuse, economic entities may be refunded the full amount of the tax paid. 

Incentive taxes are established not only in the UK, but also in Denmark, Germany, Brazil and other countries. 

In Denmark, the water tax is designed to encourage enterprises to use stricter standards for wastewater discharge and to save water in the course of economic activity, and discharge standards have been established for municipal wastewater treatment plants and industry based on the best available technologies (BAT) ^[24]. The amount of payments for large enterprises is determined according to the monitoring of wastewater discharges carried out by the enterprise itself, the data of which are controlled by local environmental services. Such payments for wastewater discharges in Denmark make it possible to stimulate environmental protection measures in general. 

In 1976, a waste water tax was introduced in Germany for the discharge of harmful substances by industrial enterprises and sewage treatment plants. This tax refers to stimulating environmental payments and it can be characterized as penalties with a certain system of discounts for discharges within the established standards, taking into account the use of the best available technologies (BAT), environmental protection measures. Fees for obtaining permits for discharges into water bodies are paid by operators of installations whose activities require obtaining permits for emissions. The tax base is the "damage unit". Emissions from industrial enterprises and municipal wastewater treatment plants fall under the payments. Charges for water intake are officially absent at the federal level in Germany, however, most lands have introduced them for water intake from surface water bodies and (or) groundwater (for example, the lands of Baden-W?rttemberg, Bremen, Hamburg, Lower Saxony, Mecklenburg-Vorpommern, Saxony) or only from groundwater (for example, Berlin, Schleswig-Holstein). The basis of the collection is the actual volume of water taken during the year, the rate is determined depending on the actual volume of water intake and the type of water (surface or ground) and the purpose of the intake, for example, for the purpose of providing water to the population (public, industrial or special water supply), for the purpose of industrial cold water supply, for special industrial purposes, for special purposes, etc. 

Water resources management in Brazil is carried out according to the basin principle, and the fee for water intake is set by local committees of water basins ^[25]. The subjects of water payments are water supply companies, the manufacturing sector, hydroelectric power producers and agriculture. The purpose of the water fee is to stimulate the rational use of water resources, as well as the financing of projects and the introduction of technologies that promote efficient water use and water intake at natural sites. 

In the EU countries, Brazil, environmental taxes and payments are mainly aimed at stimulating the reduction of non-tax payments, benefits and special permits are provided for payers, which can be regarded as stimulating positive motivation of enterprises. In the UK, tax deductions are provided if the company operating landfills invests in reclamation projects. In Sweden, payers implementing measures to reduce the sulfur content in fuel can be provided with a scheme for refunding payments for emissions, and in the Netherlands subsidies are paid for "water-intensive" industries (for example, the pulp and paper industry), directed to the introduction of BAT. If the activities of enterprises in Germany are focused on the introduction of BAT, then they are exempt from discharge fees for up to three years, discounts are also provided for discharges within the established standards, taking into account the use of BAT.

Thus, in most countries (Great Britain, Sweden, Denmark, the Netherlands, Germany, France, the USA, Brazil, Kazakhstan, China) taxes and fees perform a stimulating function, and in Canada and Japan environmental fees also perform a fiscal function. 

Examples of the implementation of the fiscal function by environmental payments can also be found in Canada. Thus, federal taxes go to the state budget, and payments introduced by administrative-territorial bodies are directed to the purposes defined by provinces and municipalities – replenishment of the provincial budget or the environmental fund for the implementation of environmental protection measures. In most of the countries we have considered, environmental taxes and payments are formed at the state level, while environmental protection measures are represented by local taxes in the tax system of Germany, the USA, and Canada.

Taxes and fees intended to reimburse environmental costs include payments for environmental pollution in the UK, Sweden, France, Denmark, Norway, and the Netherlands. 

In the UK, water use (water intake) is carried out on the basis of licenses issued by the Environmental Protection Agency and fees, the amount of which is determined for each water basin. When calculating the rates of fees, such parameters as the planned volumes of water intake, the type of power source of the water body, seasonality and intensity of replenishment of the water body are taken into account. Payments for wastewater discharge go to the national budget, and part of the funds goes to the non-state Water Fund, whose activities are aimed at financing projects focused on the protection of groundwater ^[26].

Since 1991, payments for sulfur dioxide emissions have been introduced in Sweden in order to minimize sulfur emissions into the atmosphere when using fuel in internal combustion engines ^[27]. The amount of payment is determined depending on the specific gravity of sulfur in the fuel. Payments for emissions of pollutants in Sweden were introduced in 1992 by a special law that recognized all stationary power plants as payers. The calculation of the fee was not related to the amount of the alleged damage to the environment, the amount of the payment was determined taking into account the volume of investments necessary for the development of the energy sector of the economy. In Sweden, the payer has the right to choose the option of calculating the payment based on the actual or estimated amount of emissions of pollutants. If the calculated values exceed the actual volume of emissions, the option of direct measurements is preferable for payers.

In France, the principle of "polluter pays" has been used since 1985 after the introduction of payments for the emission of sulfur oxide. Payments are also charged for nitrogen oxides, hydrochloric acid vapor emissions and volatile organic compounds. The payment base is the measured or declared amount of the pollutant. 

A distinctive feature of payments in Denmark is that the fee is charged only for "organics" and "nutrients", i.e. for the biochemical consumption of oxygen, nitrogen and phosphorus. Environmental taxes in Norway include all taxes, the collection base of which has a specific NVOS ^[28]. For example, taxes for environmental pollution include payments for emissions of certain pollutants into the atmospheric air (nitrogen oxides, sulfur), payments for waste management and the use of hazardous chemical compounds and substances in the production that can have a negative impact. At the same time, taxes for carbon dioxide emissions are not included in this category of environmental payments, since according to international taxation practice they are a tool that stimulates an increase in energy efficiency of production. In both countries, the income received from the payment of environmental taxes is used to finance measures for the efficient use of natural resources, to carry out energy conservation measures.

In the 1970s, the Netherlands introduced state fees for wastewater discharge into regional water areas ^[29]. These taxes are potentially necessary to ensure the costs of the state for measures to restore water bodies and maintain their condition. Based on law enforcement practice, the payment is calculated and charged taking into account the scale of pollution and the proportion of the content of chemically and biologically harmful substances. At the same time, the basic value for calculating payments is the so-called "pollution unit" (pollution unit). The payment applies to biochemical oxygen consumption, heavy metals, chlorides, sulfates and phosphates. In the Netherlands, the tax rates on petroleum products, coal and gas produced in the country or imported for use as fuel depend on the degree of atmospheric pollution from the combustion of these energy sources.

Types of payment for negative impact on the environment, their classification. In the Russian Federation, the fee for the negative impact on the environment is charged for emissions into the atmospheric air, discharge into water bodies and waste disposal. In this regard, an in-depth analysis of environmental payments similar to the Russian payment for NVOS is of interest.

The objects of taxation for NVOS abroad are emissions and discharges, resources, goods (products) or actions leading to NVOS. The objects for the pollution of which taxes and payments are established are: atmosphere (Sweden, Denmark, the Netherlands, France, Japan), water bodies (Great Britain, the Netherlands, Germany, Japan), waste disposal (Great Britain, USA). Payments for water pollution in Japan exist in the form of fines. Their value depends on the degree of pollution, which is compared with regional environmental standards ^[30]. In the UK, a tax is levied for the disposal of waste at the landfill, in various US states it is practiced to establish taxes only for the disposal of hazardous waste.

Unlike the practices of other countries, the environmental tax in the UK is levied on actions that lead to emissions or discharges of pollutants, and not the specified actions themselves as such, so the fee rates are set for regulatory discharges and emissions. So, in a number of European and American countries, for example, in Sweden, Denmark, Norway and Brazil, tax deductions for environmental pollution are associated with the activities of enterprises that provide NWOS. At the same time, in Germany, Canada and Brazil, it is possible to allocate fees and payments for the use of natural resources (for water abstraction, use of water resources). 

Summarizing the described classifications, depending on the sources of NWOS, it is possible to distinguish: energy, transport payments, payments for environmental pollution, waste disposal, noise pollution:

? energy taxes include taxes that represent payments for the use of a number of fuels and allow you to influence the production of carbon dioxide, nitrogen oxides and sulfur into the atmosphere (USA), as well as taxes on the use of petroleum products, coal and gas produced in the country or imported for use as fuel (Netherlands);

? for transport payments – taxes imposed in the USA and Japan. In the USA, transport taxes are calculated based on the type of vehicle engine, while in Japan this type of payment is charged, rather, based on the volume of exhaust and technical characteristics of transport; a tax on the weight of the car, for which a special car weight was developed, which determines the category of the car when registering, as well as a special tax on disposal when buying and registering a car;

? tax and non-tax payments for environmental pollution are valid in the EU countries, China and Kazakhstan, for the use of natural resources – in Germany, Brazil;

? China and Japan have introduced a tax for noise pollution. 

Depending on the direction of expenditure of funds received from payers, taxes, payments and fees for NVOS can be classified as follows:

? reduction of NVOS (Great Britain, Sweden, Denmark, Norway, Netherlands, Germany, USA, Brazil). They are aimed at implementing environmental protection measures that ensure proper air, water and soil quality in order to achieve the goals defined by legislation. By the nature of the consequences, taxes, payments, fees are allocated: for environmental pollution (EU countries, Canada, USA, Brazil, China, Kazakhstan); depletion of natural resources (Germany, Brazil); destruction, damage to natural objects (USA, Japan); violation of the ecological balance in the natural environment (Great Britain, the Netherlands). These taxes lead to a reduction in discharges and emissions of pollutants, the mass of waste, an increase in the secondary use of industrial waste, a reduction in waste, their disposal, the reclamation of landfills, the use of modern technologies in production that ensure environmental protection. In the USA, the Netherlands and Japan, goods (products) are subject to taxation. For example, in New York, there is a tax for companies producing containers for liquids that are not recyclable and recyclable (cans and other containers disposed of immediately after using the products); in the Netherlands, the tax is levied for the extraction and use of petroleum products, coal and gas within the country, as well as for its limits within the scope of import. In Japan, the tax is levied, among other things, for diesel and aviation fuel, electricity produced in the country, and special tax surcharges are applied for hazardous industries. In the USA, it can also be taxes on certain types of fuel, which makes it possible to control the production of carbon dioxide, nitrogen oxides and sulfur into the atmosphere;

? Investment (Netherlands, Germany). These include discharge payments for municipal wastewater treatment plants in the Netherlands, Germany, which are repayable: they are invested in the main production. 

? Research (France). Payments in France are directed to their administration, scientific research carried out by state institutions, environmental monitoring, support for companies working in the environmental field;

? social (Japan). The system of monetary compensation for health damage to victims of pollution in Japan has a social spending direction;

? solving issues of a specific nature, for example, a tax on the cleaning of oil spills on reservoirs in the United States; 

? creation of negative motivation for activities that provide NVOS. Such payments, in particular, include trading quotas, special permits and fines used in the USA, Canada and Japan. In modern conditions, the most common in the United States are sold permits and fines for non-compliance with their conditions. In this case, violations are divided into accidental (negligent) and conscious. Thus, in accordance with the "Clean Water Act" in the United States, negligent violation of the conditions of the permit, that is, a violation committed through negligence, entails a fine, imprisonment or both penalties at the same time. In the provinces of Canada, permits for emissions dependent on the toxicity of the substance are obtained by paying administrative fees; 

? administrative – these are fees for the provision of public services provided by environmental protection authorities for the purpose of environmental regulation, inspections of enterprises, etc. In the UK, enterprises pay a fixed fee for obtaining general and industry-specific permits if their activities are regulated by environmental legislation. The rates of payment of permits depend on the rating of enterprises, which is calculated based on the following indicators: the technological complexity of the activities carried out, the volume of emissions, discharges of pollutants and waste disposal, the location of the production facility and the rating of compliance with legal requirements. With the improvement of the environmental performance of enterprises, they can increase the rating, and therefore reduce the rates of payments for NWOS within the framework of previously issued permits. Norway has established special payments for administrative services provided by authorized bodies in the field of environmental protection. In Germany, fees for the provision of public services are levied to pay for the services of public authorities, which can be individually determined for enterprises that are required to pay duties. Examples of such fees are administrative fees for issuing permits. In the USA, in order to obtain an emission permit, a fee is provided for the provision of public services, carried out at the rates set by the states for each ton of emissions (discharges) of pollutants;

? approaches to determining tax rates for managing externalities. It should be noted that there is no unity of approaches. The rates of payment for emissions of pollutants into the atmosphere in Norway are applied for two pollutants (nitrogen oxides and sulfur), in Canada and the USA these payments are made by obtaining a permit for emissions and discharges of a specified amount of substances. In the UK and Brazil, this practice of taxation of emissions and discharges of pollutants is not applied. In the UK, there are two fixed rates (reduced for inert waste and standard) that apply to waste of any hazard class. In the USA, taxes are imposed only on the disposal of hazardous waste. In the EU, the fee is used only for the final disposal of waste in landfills. In the OECD countries and Brazil, the purpose of tax payments is to implement environmental measures: financing projects for the efficient use of natural resources (Norway); research and development, financing measures to improve water quality, operation of treatment facilities, support research and development in order to prevent the formation and processing of hazardous waste, damage control and pollution (Germany); projects and educational programs on river basin management and investment in the introduction of wastewater disposal technologies (Brazil).

Summing up this extensive analysis of foreign experience in the application of economic mechanisms for regulating environmental externalities, we schematically summarize the classification features and types of environmental taxes, payments and fees (Table 1).

Table 1 – Classification of environmental taxes, fees and payments abroad

Source: compiled by the author

Discussion

Thus, the study of foreign experience in the application of economic mechanisms for regulating environmental externalities revealed that in the system of tax and non-tax payments of the analyzed countries there are taxes, payments for environmental pollution (for the release of pollutants into the atmosphere, for discharge into water bodies, for waste disposal, for obtaining permits for emissions). Payments for discharges and emissions, the resources of pollutants used are applied both in the EU countries and in the UK, USA, Canada, Japan, Brazil. It should be noted that in all analyzed countries, the object of harm is the environment, a natural object, and in Japan, the object can be human health, property of individuals and legal entities.

Environmental problems in most countries encourage the stimulation of certain sectors of the economy, economic entities to switch to BAT by creating tax regimes aimed at environmental protection measures. Environmental payments and taxes contribute to the modernization of production, the development of competitiveness, the reduction of energy-intensive industries, the development of relevant R&D.

Thus, in the framework of combating NWOS and regulating the environmental situation on the territory of the Russian Federation, in particular, it makes sense to borrow the following international practices, taking into account regional legal and economic specifics:

? introduction of incentive payments for NVOS;

? establishment of emissions, discharges and actions leading to NWOS as objects of taxation;

? establishment of requirements and standards for emissions, discharges and disposal of waste;

? the direction of potentially received funds for the implementation of environmental protection measures, investment activities and research needs;

? establishment of benefits and special permits for enterprises implementing modern technologies in production for environmental protection.

An analysis of foreign practice of applying economic mechanisms for regulating environmental externalities has revealed the fact that the ultimate goal of establishing and administering payments for emissions and discharges abroad is to reduce emissions (discharges) of pollutants and improve the state of the environment, as well as replenishment of budgets or various funds whose activities are aimed at reducing NWOS. At the same time, the introduction of environmental taxes in the EC countries is accompanied by a reduction in taxes on labor and capital. As the experience of foreign countries shows, the system of environmental payments performs the main function of stimulating economic entities to reduce the NWOS, use the best available technologies, develop programs and projects aimed at implementing environmental measures. In practice, most foreign countries use environmental taxes to some extent in their environmental activities, and this experience would be useful in developing an environmental taxation system in Russia.