Let’s start with the term called environmental degradation.

The causes of environmental

degradation take place in two ways:

1. Anthropogenic factors: Urbanization, Industrialization and Overpopulation

2. Natural factors: Floods/droughts and desertification/Pollution/forest fires/Climate Change

CSR, COMPENSATE

COP 28 INDIA GREEN CREDITS

The fundamental difference between conventional goods e.g. bread which the market allocates and
rations efficiently and environmental commodities e.g. pollution which the market fails to allocate
efficiently and this market failure is caused by the nature of pollution and negative externalities of
these environmental commodities. In other words, when the environment market mechanism do
not function efficiently, it leads to market failure.

We all know the meaning of externalities, i.e., the impact of one person’s economic activities affect
the other without permission or direct transaction and those activities are overlooked by the
market. Environmental externalities occur when these activities result in positive or negative effects
on the environment, without the market paying for the economic loss, which is not account for the
restoration plan for the damage caused by the pollution due to the emissions/effluents released into
the environment.

Externalities that benefit the third party- Positive externalities.

Externalities that are detrimental to third parties- Negative externalities.

An efficient market- all parties to the transaction are benefitted. If the arrangement does not benefit
all concerned, then the market is inefficient or what is called Market Failure.

The basic problem in the case of pollution without a price system, polluters do not see the damage
caused by the pollution they emit. The alternative approach of the government intervening and
sending a signal to polluters is the government price pollution. Polluters pay a price for every unit of
pollution they generate. This corrects the market failure, at least in theory.

Earlier in the 20th century, the English economist- Arthur C. Pigou, argued for the imposition of taxes
on generation of the pollution. Since the social cost of pollution is more than the private cost to the
polluter (actually, polluters have a negative cost since they save money by polluting), the
government should intervene with a tax, making pollution more costly to the polluter. If the
pollution is more costly to produce, the polluter will produce less pollution. This tax is called the
Pigovian tax.

SLIDE 1: From the presentation, we will get a knowledge of how green tax is implemented and
impacts the economical aspect of our environment.

SLIDE 2: Let us first know about its history and background

SLIDE 3: This slide shows the cause-effect relationship/interconnectedness

SLIDE 4: Few real scenarios happening in the present environment

SLIDE 5, 6, 7: The next three slides will give us an overview, help to understand and clarify the basics
of green tax
SLIDE 6: Example: 1= Coal mining for electricity purposes is an environmental hazard (leaching of soil).
So, govt subsidy- rise in price of electricity to decrease coal mining. 2= Minimum support price: Ex-
Rise in price of an agricultural commodity with the demand-supply curve. 3= Taxes are imposed on
products that harm our environment and taxes are decreased on Environmentally friendly products

SLIDE 7: Initiatives= These are the following to be said;

▪ Personal vehicles older than 15 years tax charges

▪ No charge on LPG solar panel CNG
▪ Commercial tax on cars older than eight years

SLIDE 8, 9: Regulations of green tax for the human welfare, thus producing a green economy for our
planet