The use of carbon taxes and other forms of “green” taxation to improve the environment and raise government revenue requires careful planning, recommends a position paper from the Association of Chartered Certified Accountants.

In the paper, ACCA warns that carbon taxes will not be the panacea national governments are probably expecting. “Green taxes need to be transparent and unambiguous so the public and business understand what benefits are going to result for the potential pain caused,” said ACCA global head of taxation Chas Roy-Chowdhury.

Finland was the first country to introduce a carbon tax, in 1990. In the U.S., the Obama administration has promoted tax measures to increase investment in renewable energy sources, enacting tax credits for the expansion of wind, solar, biomass and other renewable energy technologies.

ACCA recommends that governments ensure that green taxes are global, with global coordination of policies and ideas. Government officials should design and implement green taxation policies carefully, and then measure and analyze the results. They need to consult widely with the electorate and with business leaders before introducing taxes, raising awareness of the need for this type of taxation and explaining the benefits. Green tax policies need to be explicit, transparent and understandable.

Global synchronization is also a necessity. “If environmental taxation lacks international coordination, it will not impact global pollution levels, as companies will simply relocate and move the pollution problem with them,” said Roy-Chowdhury. “If measures are implemented unevenly, in one country and not another, it leads to a loss of international competitiveness.”

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