Panel II “International cases”

“Italy”

Aldo Ravazzi Douvan aldo.ravazzi@tfambiente.it

Italian Ministry of Environment, Land & Sea

OECD-JMTEE Tax & Environment, Past Co-Chair

“Green Taxation: a contribution to sustainability”

Lisboa, Fundação Gulbenkian, 30 April 2013

The starting point in December 2011 (1)

- Higher share and wider range of green taxes

than other EU South Countries

- Decreasing share : 1995: 9% of TR, 2011: 6%

(Dk 12%, Tk 14%, Costarica 18%)

- Issue of effectiveness, structure, rates

Economic Instruments in Italy (historical)

Excise tax on fuels and energy (the EU ETD

has slowed down Italian tax leadership -

Energy Intensity Italian leadership )

Car taxes (Acquiral one-off and

Circulation annual )

Road pricing on highways (before and after

the privatisation of Iri-Autostrade)

The starting point in December 2011 (2)

Economic Instruments in Italy (2nd generation)

1991 first green tax reform attempt (Ruffolo package) fails

Introduced in a non-systematic way:

- 1991 plastic bag tax (trasformations, well before Ireland)

- 1992 water sector reform (Law Galli – principle of full cost

recovery of the integral cycle of water)

- 1991-2005 recycling consortia fees (es. batteries, exhausted oil,

packaging), then Conai system fees (industrial management)

- 1994 airplanes noise tax, from 2000 regional (disappeared)

- 1995 landfill tax (well before Gbr)

- 1996 SO2-Nox emissions tax on large thermic plants

- 1997 Waste reform (Decree Ronchi) (from tax based on surface

to tariff based on volume/quantity - political and legal problems)

- 1997-98 incentives for car scrapping; 1st phase generic, 2nd

phase overtly ecological

- 1999 CO2 tax (component of excise on fuels/energy), suspended

after 2years “cause of inflation”, partila earmarking, impact, …

- …

The starting point in December 2011 (3)

Economic Instruments in Italy (environment-energy)

Creation of markets whuch did not exist:

- GHG emissions market (ETS)

Problem of non included sectors

Problem of the initial distribution of rights:

historical criteria - potential development

criteria - competitive bid

Problem of double taxation: ETS or CO2

tax? Duplication or mutual reinforcement?

Link among european markets, with third

markets (eg Asl-Jap), with aid projects, …

- Green certificates (renewables) - Feed-in-tariff

- White certificates (energy savings)

The starting point in December 2011 (4)

Environmentally Friendly Subsidies/Incentives

in Financial Laws 2007-8-9-10 (Govts, consensus)

Introduction of numerous incentives / subsidies :

- car scrapping and replacement schemes

- transformation of polluting vehicles (to gas/gpl)

- restructuring of vehicle taxation

- solar panels, photovoltaic, renewables

- energy restructuring of existing buildings

- high energy efficiency of new buildings

- replacement of industrial engines

- high efficiency lightening in stores

- replacement of polluting refrigerators (with A+)

- …

Environmentally Harmful Subsidies/Incentives

-Disregarded, tax expenditures finally reviewed

KNOWLEDGE WINDOWS OF OPPORTUNITY

EUROPEAN ENVIRONMENT AGENCY

(e.g. Country workshops, Rome Dec.2011 )

OECD (e.g. GTRs, EHSs, Green Growth)

UNEP (e.g. Green Economy, Resources)

EUROPEAN COMMISSION (e.g. MBI

2007 White Paper 2007, MBI Forum,

Europe 2020, White Paper Delors, EU

Semester Recommendations)

EAERE-ISEE-GCET Scientific Conferences

GREEN BUDGET EUROPE (support to EU

Country Presidencies and EC, annual

conferences, researches, CETRIE, … )

ECONOMIC KNOWLEDGE W. OF OPPORTUNITY.

• Nicholas Stern (2006), "The Economics of Climate Change

- The Stern Review ”, HM Treasury, London

• Nicholas Stern and James Adams (2009), “The Global Deal:

Climate Change and the Creation of a New Era of Progress

and Prosperity”, Library Edition

• Pavan Sukhdev ed. (2010 e 2011), “TEEB - The Economics

of Ecosystems and Biodiversity”, vol.1 “TEEB: Ecological

and Economic Foundations , vol.2 “TEEB in National and

International Policy Making”, Earthscan, London

• E. Von Weizsaecker et al. (2009), “A Long-Term Ecological

Tax Reform”, ch.7 in “Factor 5 - Transforming the Global

Economy through 80% Improvements in Resource

Productivity”, Earthscan, London

10 Planet

Ecosystems

to be monitored :

1. Climate change

2. Biodiversity loss

3. Nitrogen cycle

4. Phosphorus cycle

5. Stratospheric

ozone depletion

6. Ocean acidification

7. Global

freshwater use

8. Land system

change

9. Atmospheric

aerosol loading

10. Chemical pollution

Planetary Boundaries

TRYING AND PREPARING

"Environmentally Related Taxes and Fiscal Reform"

conference organised by the Treasury and the

Finance Departments (of the Ministry of Economy

& Finance) with the technical support by the

Ministry of Environment and the EEA (European

environment Agency) (Rome 15.11.2011)

“Environmental Fiscality and Fiscal Reform”

internal seminar of the Ministry of Environment at

University of Roma Tre (Rome 19.4.2012)

Consensus building - experts maturation -

decision-makers - economic-financial crisis

LEGISLATIVE WINDOWS OF OPPORTUNITY

Government: approves in April 2012 a project of

General Tax Reform including for the first time

ever an explicit element of Green Fiscal Reform

“Delegation to the Government for defining a fairer,

more transparent and growth-oriented fiscal system”

Parliament: must approve the delegation to the

Government to design details and implement it in

the following 9 months

For the Green Fiscal Reform, powers are potentially

very wide

Recognizable principles of GTR and GFR:

a) Growth

b) Fiscal Consolidation (burden shift)

c) Social Fairness

PROPOSED EFR: MAJOR ELEMENTS - 1

1. makes reference to European policies,

green economy and green growth;

2. foresees a wide delegation to Government:

“new forms of fiscality, aimed at preserving

and guaranteeing the environmental balance

(incentives and green taxes) and to review

the discipline of the excise on energy

products as a function of CO content”;

3. quotes explicitly the introduction of the

“carbon tax” (limited however to non-ETS);

PROPOSED EFR: MAJOR ELEMENTS - 2

4.CO2 Tax only on non-ETS sectors (e.g. UK

is taxing progressively also ETS sectors)

5.CO2 Tax revenue used with priority to

finance renewables & energy efficiency

(replacing feed-in tariffs financing thru

electricity bills) and eco-innovation

6.Phasing out of EHSs (esp. excise tax)

7.Any other measure possible

Entry into force linked to European

Directives and Regulations (mainly ETD)

ECONOMIC WINDOWS OF OPPORTUNITY

Economic-Financial Crisis

Heavy (accumulated) Public Debt (reached

130% of GDP, reduction re-starting)

EU Maastricht Parameters for Convergence

(public deficit 3%, public debt 60%, inflation

+1,5%, exchange rate stability, long-term

interest rate +2%)

If we had chosen other parameters, e.g.

employment rate, Gini index, private debt,

may be history would be different…

POLITICAL WINDOWS OF OPPORTUNITY

+ Technical Government (Anti-Crisis,

Emergency) in Nov.2011

+/- Short-term perspectives (18 months),

elections planned for Spring 2013

Credibility of initial measures:

+ Save-Italy Decree Dec.11 (pensions, Imu,

1000€, EU Funds, fiscal evasion, etc.)

+ Grow-Italy Decree Jan.12 (firms,

liberalizations, labour market reform, etc.)

+ Simplify-Italy Decree Feb.12 (citizens &

firms: certificates,payments,procedures,etc.)

POLITICAL WINDOWS OF OPPORTUNITY

+ Does not need to be re-elected (Monti “my

constituency are the future generations” )

+/- Citizens/Consumers/Voters irritation

. with inefficiencies in public expenditure

. with the fiscal burden in general

. with each tax in particular

. with income taxation especially

. compensation measures not believed

GOVERNANCE WINDOWS OF OPPORTUNITY

Ministry of Economy & Finance looking with

priority for funds, tax revenue stability, revision

of the tax system

Ministry of Development (Ind+Energy) looking

with priority for competitiveness and innovation

Ministry of Welfare looking with priority to

employment

Ministry of Environment looking with priority

for funds for environmental policies, eco-

innovation and solve ecological crises (climate,

waste, water, biodiversity, contaminated sites, …)

Equilibrium is to be found…

CLOSING WINDOWS OF OPPORTUNITY - 1

Approved by Government on 16th April 2012.

Submitted to Parliament on 15th June 2012.

The Fiscal Commission of the Chamber cancels

environmental fiscality on 9th October 2012.

The Fiscal Commission of the Senate reintroduces

environmental fiscality on 21st November 2012.

The Monti Government looses support on 6th Dec.

2012 and resigns on 21st; new Parliament elections

on 24-25th Feb. 2013 (instead of April);

New old President (20); new Government Letta (28)

The Parliament approves the Stability (Financial)

Law before the call for elections and drops other

bills including the Fiscal Reform Delegation Law .

CLOSING WINDOWS OF OPPORTUNITY - 2

A) Procedures get longer than expected

B) Several important other Government acts

(Save Italy, Simplify Italy, Grow Italy, urgent

measures, Stability Law, etc.) become laws in the

period Nov.2011-Dec.2012 including also fiscal

measures; the Fiscal Delegation Bill, precious

instrument for reordering the fiscal system, plays

for many a residual role.

C) Among environmental measures

1.Increase of fuel taxes (excises): between Nov.11-

Jul.12 from 0,61 to 0,72 € per l/oil and from 0,47 to 0,61 €

per l/diesel (started reducing the gap)

2.Reduction by 1/4 of company cars deductions.

CLOSING WINDOWS OF OPPORTUNITY - 3

3.Additional tax on large vehicles (Superbollo)

10€/Kw in 2011, 20€/Kw in 2012 over 185 Kw

4.Water tariffs analysis and definition conferred to

the Authority for Electricity and Gas.

5.Restructuring of renewables and energy

efficiency incentives in favour of thermic

renewables (biomass heating, heat pumps, thermic

solar and solar cooling) and energy efficiency.

6.Prorogation of the 55% tax reduction for energy-

efficiency building restructuring.

7.Strengthening of White Certificates for energy

efficiency in firms.

8.Incentives for green jobs for young unemployed.

CLOSING WINDOWS OF OPPORTUNITY - 4

Some negative steps as well

Refiscalisation of the waste service: a waste tax

(TARES) reintroduced from Jan. 2013; the Waste

Reform 1997 attempt to pass from a waste tax

(TARSU) to a waste tariff (TIA) is abandoned.

…

Some major open issues

Use of revenue from ETS competitive bids

Question of ICI-IMU (annual home property tax

abolished, then reintroduced, proposals of abolition

and restructuring: how to replace it?)

BUILDING NEW WINDOWS - 1

CETRIE Report (“Carbon and Energy Tax Reform in

Europe”) by Vivid Economics, European Climate

Foundation and Green Budget Europe.

Guillaume Sainteny: “Plea for ecofiscality”.

Thomas Sterner: car taxation not necessarily regressive.

Environmentally harmful subsidies to be removed:

OECD-IEA-WB, Earth Track, GSI, IEEP.

Cingano-Faiella (Bank of Italy): CO2 tax on transport

not necessarily regressive.

Pontoni-Cusumano (U. Bocconi): Green Economy for

new and better jobs.

WWF-REF/E Report late 2012: WWF for CO2 Tax

Ambiente Italia Report 2013: major NGO for GTR

BUILDING NEW WINDOWS - 2

European Semester Recommendation:

Italy is requested in 2012 to “Take further action to

shift the tax burden away from capital and labour

to property and consumption as well as

environment” (Recommendation 5).

European Regulation N. 691/2011 on economic

environmental accounts (UN-SEEA , OECD,

Eurostat, EEA, OECD, ISTAT) including a

module on environmental taxes; next EFS-EHS?

IMF recent contributions.

BUILDING NEW WINDOWS - 3

OECD Environmental Performance Review of

Italy (approved Oct. 2012, launch March 2013): “Implement a comprehensive environmental fiscal

reform as part of the proposed reform of the tax system

that: (Recommendation 8)

i) removes special tax provisions that are

environmentally harmful and economically inefficient;

ii) restructures energy and vehicle taxes so that they

better reflect environmental externalities including

greenhouse gas emissions; and

iii) considers reforming existing, or introducing new,

environmental taxes on resource use and pollution (e.g.

on water abstraction, wastewater discharges,

pesticides, fertilisers and packaging materials)”.

BUILDING NEW WINDOWS - 4

States General of Green Economy , Nov. 2013

Sustainable Development Foundation and

Ministry of Environment, Land & Sea

wide consultation of firms, administration and

research:

“4. Reinforce economic instruments based on the

PPP …”

“5. Adopt measures of ecological taxation,

shifting part of the fiscal burden from labour and

investments towards resource consumption...”

BUILDING NEW WINDOWS - 5

The Monti Report (2010) to Barroso and E.U:

“A New Strategy for the Single Market at the

Service of Europe's Economy and Society”: “It is also realistic to imagine that consolidation efforts will

entail a shift from income taxation towards indirect taxation

and a greater emphasis on less growth distorting taxes,

notably environmental taxes. Under these conditions,

coordination of tax policies could be an important

component of a fiscal consolidation strategy at EU level and

improve the effectiveness of national action”.

Advantages of fiscal coordination

Benefits of reducing the fiscal burden on labour

“Develop the area of environmental taxation in the

broader context of tax policy and their impact on

growth and employment” Key Recommendation

Open issues - Conclusions 1a. In normal times: Environmental Fiscal

Reforms and Fiscal Neutrality

1b. In crisis times: Dynamic Neutrality: instead of Y Tax and Firms Tax, raise E.T.

1c. In happy times: the tax burden shift can be applied even when decreasing taxation

2.Ear-marking for transition

3.Quantity and quality (impact, evaluation)

4.Labour taxation & Green jobs

5.The size of the manoeuvre

Prepare the ground and be ready

We need to give value to environment, correct the market, restore fair competition