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Uruguay Can Move Ahead on Implementing Green Taxes

3 December 2015|News

A document prepared by ECLAC’s Office in Montevideo analyzes the economic activities that could be taxed with these kinds of levies.


Livestock in Uruguay
One of Uruguay’s environmental problems is the emission of greenhouse gases by livestock.
Photo: EFE/Iván Franco

Uruguay lags comparatively with regard to the inclusion of environmental considerations in policy instruments, according to the study Green Taxes: Viability and Possible Impacts in Uruguay (Spanish only), which was prepared by the Montevideo Office of the Economic Commission for Latin America and the Caribbean (ECLAC). Nevertheless, the document warns about the use of instruments or mechanisms that, if the environmental criteria are not specified, have direct consequences on the environment, such as in the case of taxing fossil fuels.

The report reviews international environmental scholarship on this issue and analyzes Uruguay’s main environmental problems in light of this evidence. In addition, it examines the legislation and tax structure currently in force and analyzes the possible economic activities on which environmental taxes could be levied.

In recent years Uruguay has experienced a phase of marked economic growth, which has been accompanied by some progress on environmental matters but also but the appearance of problems in this area that are closely linked to the expansive cycle. In this way, the text contends, it can be seen that the environmental dimension has not been fully incorporated into decision-making, both at a public level and among consumers and business people.

In Uruguay, as in the rest of the world, environmental taxation is centered fundamentally on the energy sector. According to the report, there is a tax base in the country related to greenhouse gas emissions, which is potentially very large and stable, that would enable the implementation of fiscal reforms of this kind.

The study indicates that at least two elements must be taken into account when thinking about the design and application of environmental taxes.

Firstly, ecological problems cannot be addressed in an isolated fashion. A multidimensional approach must be adopted to design and evaluate environmental policies and to formulate the instruments that contribute to their implementation. Likewise, the rest of the country’s public policies must also weigh potential environmental impacts.

Secondly, in light of the challenge involved in integrating taxes into a set of environmental tools, officials must take into account the role played by the ideas of various social actors regarding the viability, justness and efficacy of fiscal policies. “It is especially important that policy makers be aware of this aspect when the time comes to include taxation instruments in the catalogue of environmental policy tools, in order to have a positive impact on environmental performance without causing undesired collateral effects,” the text states.

Some of Uruguay’s main environmental problems include the emission of greenhouse gases by livestock, soil erosion and degradation and the loss of biodiversity associated with agriculture, and the insufficient treatment of industrial and household waste. Additionally, the transportation system is almost exclusively dependent on fossil fuels and the number of automobiles has grown inordinately in recent years.

According to the document, to increase the impact of green taxes in Uruguay, it is vital that officials take into account the redistributive effects on competitiveness, as well as the associated institutional structure. Finally, the report explores the possibility of levying taxes on agrochemicals, packaging containers and plastic bags.