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Following the 1993 White Paper on Growth, Competitiveness and Employment, the European Commission has carried out extensive work on integrating environmental consideration in policy making in all sectors of the economy. Some of its main findings:

  • - The idea of sustainable development needs to be transformed into a more tangible and measurable concept. The development of environmental pressure indicators and indices, green satellite accounts to national accounts and in the long run integrated environmental/economic national accounts need to be developed.
  • - Economic policy makers should ensure that the integration of environmental policies in other policy areas, where appropriate, relies as much as possible on the market mechanism, as this often enables solutions that are least cost to the economy to be found.
  • - The objective of «integration» suggests that a review of the environmental implications of existing tax and incentive schemes is needed. Incentives to environmentally unsustainable activities should be suppressed where appropriate.
  • - The introduction of environmental taxation is likely to constitute an important element of the new «integration» approach.

An adaption of existing tax and social security schemes is desirable for economic and employment reasons (e.g. in view of the contribution these systems might make to inflexibilities on goods and labour markets). On the other hand, the new «environmental integration» strategy, will in a number of cases probably entail the introduction of taxes correcting for environmental externalities, which could raise significant revenues. This coincidence should be exploited with a view to realising synergies. For example, if indirect labour costs are especially harmful to employment at the bottom end of the labour market, it could be considered to reduce labour taxation in this segment. Financing might come partly from environmental taxes that have to be introduced anyway for reasons of sustainable growth. It seems that, under certain circumstances, both environmental and economic bebefits can be realised.

European Commission, 1994