Unit 6: Taxes and Subsidies Flashcards
Incentives
A thing that motivates or encourages one to do something. A payment or concession to stimulate greater output or investment.
Preferences
A ranking system where there is a greater liking for one alternative over another or others.
Environmental tax shifting
Any approach which increases taxes on actions that are environmentally harmful.
Environmental subsidy shifting
Increases subsidies on actions that are environmentally beneficial OR decreases subsidies on actions that are environmentally harmful.
Full cost accounting
Deciding the value of a tax or subsidy by “Getting the Price Right’’ and identifying the exact cost of negative and positive externalities and correcting them. Using taxes and subsidies to ‘internalize’ the externalities.
Goal Oriented Approach
Deciding the value of a tax or subsidy by its desired outcomes,
which are determined by policy makers, environmental scientists, economists.
Elastic prices
When the sale of goods or services are very affected by price
Inelastic prices
When the sale of goods or services are NOT very affected by price
Price elasticity of a good
How effective a tax can be in changing behavior.
Canadian carbon tax
Federal and provincial, provinces can create their own and/or use the federal one. ‘Revenue neutral/positive’ approach, since citizens get more money back.
Canadian Vehicle Efficiency Program (VEI)
Ran from 2007-2009, included a rebate (subsidy) for highly fuel-efficient vehicles; a neutral treatment for vehicles of average fuel efficiency; and a tax on fuel inefficient vehicles.
Payment for Ecosystem Services
Individual owners of environmental assets often only get benefit from their asset if they exploit it. By paying owners of environmental assets not to exploit them, society gets the benefits those areas provide.
Conservation easements
Those who want to protect natural or agricultural land from being developed purchase the right to develop the land from a land owner. The land owner retains ownership over the land, but no longer has the right to develop that land.
New York City Catskills Watershed Program
Created to Influence the behavior of those who live in Catskill watershed so that NYC has access to high quality water. Uses subsidy based policy instruments to achieve its goals. (subsidize cost of public sewage, private septic system, school educational campaigns, private forestry; pay farmers not to farm all or part of their land.
Perverse subsidies (unit 6)
The current economic system in Canada and elsewhere has many subsidies that promote environmental degradation. These are ‘created negative externalities’ .
