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Environmental Taxation

As environmental, social and corporate governance (ESG) issues rise on leadership agendas globally, tax is being seen as increasingly important in the environmental agenda, decarbonization and climate change as a whole.

Explore Environmental Taxation

Applying tax to polluting activity internalizes the cost that otherwise would be borne by society, providing an incentive to both companies to reduce polluting activity and to consumers to switch away from consuming polluting goods and services. By putting a cost on polluting activity, green taxes provide a price signal that encourages investment in green technology and products. Tax policy can also be used to provide incentives for green investment, for example in the form of credits and deductions.

It has been estimated that an investment of around US$4bn per year into the clean energy sector alone will be needed in order to ensure that the world becomes carbon neutral by 2050. Such funding is unlikely to be provided solely by governments, meaning private investment is required. There are, however, a number of barriers to ensuring private capital is invested either in new technologies or in certain parts of the world, particularly in developing countries. Tax is only one of these barriers, and unlikely to be the major one, but tax holds an important role in facilitating investment.

As responsible investment becomes increasingly attractive, we continue to look at the role tax plays in ESG through KPMG’s Global Responsible Tax Program.

Themes in this section include:

  • How can tax policy drive investment into a green recovery?
  • Potential designs for a carbon border adjustment mechanism
  • The compatibility of a carbon border adjustment mechanism with World Trade Organisation rules

Explore Environmental Taxation

Image of Part 2 | Putting Tax to Work: Tax Policy and the Changing Nature of Work

Part 2 | Putting Tax to Work: Tax Policy and the Changing Nature of Work

Global South

03 Jan 2024
7 min
Image of Part 1 | Putting Tax to Work: Tax Policy and the Changing Nature of Work

Part 1 | Putting Tax to Work: Tax Policy and the Changing Nature of Work

Global North

20 Dec 2023
7 min
Image of Part 2 | Tax and Carbon: Carrot or stick? Virtual roundtable

Part 2 | Tax and Carbon: Carrot or stick? Virtual roundtable

Held on 9 November 2023

19 Dec 2023
8 min
Image of Part 1 | Tax and Carbon: Carrot or Stick? Virtual Roundtable

Part 1 | Tax and Carbon: Carrot or Stick? Virtual Roundtable

Held on Thursday 5 October 2023

19 Dec 2023
6 min
Image of Tax and the Circular Economy: The African perspective

Tax and the Circular Economy: The African perspective

A virtuous circle?

19 Dec 2022
4 min
Image of Tax and the Circular Economy: The European perspective

Tax and the Circular Economy: The European perspective

A virtuous circle?

16 Dec 2022
4 min
Image of Podcast: Using taxation to pursue decarbonization

Podcast: Using taxation to pursue decarbonization

Future of Tax podcast episode featuring: Chris Morgan, Global Leader, KPMG Responsible Tax Program, KPMG International, Hannah Hawkins, Principal, KPMG Washington National Tax, KPMG in the US, Becky Knight, Practice Manager, KPMG Global ESG Tax and Legal, KPMG International.

Image of Business consequences of tax driving net zero ambitions

Business consequences of tax driving net zero ambitions

Tackling climate change is a key issue. This has become more pressing than ever with the fuel price increases and growing uncertainty caused by the Russian invasion of Ukraine.

Image of Circular economies create new consortiums

Circular economies create new consortiums

It's 2040. The linear economic model is no more. Find out the next generation’s take on the evolution of the circular economy.

01 Mar 2022
1 min
Image of Tax and facilitating investment into carbon abatement projects: Discussion paper in the light of COP26

Tax and facilitating investment into carbon abatement projects: Discussion paper in the light of COP26

We are pleased to release a new discussion paper as a part of our lead-up to the global conversation around carbon reduction in the lead-up to COP26, which explores the role of tax in facilitating investment into carbon abatement projects around the world.

26 Oct 2021
1 min
Image of Plastic Tax

Plastic Tax

Reduce, reuse, recycle.

01 Sep 2021
1 min
Image of the world magnified from an aerial viewpoint

Towards an Effective Carbon Border Adjustment Mechanism

As the world seeks to address climate change, there are various approaches which can be used.

19 Jul 2021
17 min
Image of The impact of carbon pricing and potential effects of a CBAM

The impact of carbon pricing and potential effects of a CBAM

Participants thought that if some countries or regions significantly increase CO2 reduction ambitions but others do not, there is likely to be a significant risk of carbon leakage. While a global approach to creating a minimum carbon price would be best approach, it could be very difficult to achieve.

22 Apr 2021
14 min
Looking up in the inside of a circular building

Making Carbon Border Adjustment proposals WTO-compliant

KPMG’s Global Responsible Tax Project recently held a roundtable in collaboration with KPMG IMPACT, to look at the technical difficulties of designing a Carbon Border Adjustment Mechanism (CBAM).

25 Mar 2021
1 min
Close up of a cross cut tree trunk showing its rings

Comments on the European Commission’s public consultations on the Energy Tax Directive and Carbon Border Adjustment Mechanism and KPMG’s ESG approach

Authors: Loek Helderman, Global Tax Lead KPMG Impact, Mike Hayes,  KPMG Impact Lead on Climate Change and Decarbonization and Chris Morgan, Head of Global Tax Policy, KPMG International 

12 Nov 2020
1 min
Image of circular lily pads on a pond

Going green: Driving investments with multi-lateral organizations

While the “carrot” of tax incentives may be useful to drive, or even kick start investment into new technology or regions, the recent roundtable discussion confirmed they are not the key issue in unlocking green investment. Similarly, while environmental taxes and reducing fossil fuel subsidies can help redirect investment into green projects, there are already many investors willing to fund...

26 Oct 2020
9 min
Image of a circle clearing in a group of trees

Going green: Economic recovery through the lens of an asset manager

Tax incentives can play a potentially important role in encouraging green investment, but must be transparent and clearly linked to environmental benefits. There is a need to broaden the base of investors which is likely to require mechanisms to reduce risk – for example through blended finance projects. Obtaining tax certainty, especially over the treatment of structures which require intermediate...

10 Sep 2020
7 min

Contributors

We are grateful to all of our contributors, including:

Rebecca Cagigao, Program Executive and Content Manager, Jericho Chambers

Rebecca Cagigao

Program Executive and Content Manager at Jericho Chambers

Grant Wardell-Johnson, Head of Global Tax Policy, KPMG International, KPMG International

Grant Wardell-Johnson

Head of Global Tax Policy, KPMG International at KPMG International

Chris Morgan, Global Leader for the KPMG Responsible Tax Program, KPMG LLP

Chris Morgan

Global Leader for the KPMG Responsible Tax Program at KPMG LLP

Julia Endres, KPMG in Germany

Julia Endres

at KPMG in Germany

Becky Knight, Manager, Global Tax Policy, KPMG International

Becky Knight

Manager, Global Tax Policy at KPMG International

Hannah Hawkins, Principal, KPMG Washington National Tax, KPMG in the US

Hannah Hawkins

Principal, KPMG Washington National Tax at KPMG in the US

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