IMPACT OF GREEN TAX ON ENVIRONMENTAL PROTECTION (FEDERAL MINISTRY OF ENVIRONMENT, LAGOS STATE)

CHAPTER ONE

INTRODUCTION

1.1      Background to the Study

 

Green taxes, also known as environmental, pollution, eco and carbon taxes, are meant to advance the environment (Al-Alawi & Nobanee 2020). Green taxes, designed to impose a financial charge on environmentally harmful activities, aim to incentivize individuals and businesses to adopt more sustainable practices. By shifting the economic burden towards pollution and resource depletion, these taxes encourage innovation in green technologies and reduce carbon emissions.

Green taxation is a significant economic policy instrument for central governments since it promotes society’s and economy’s long-term viability. Its meaning may be broad, but in general, it is a tax with predominantly environmental effects or a tax that controls the effects of particular green initiatives in a major way (Carraro & Zatti 2012). Selective excise taxes, the most important of which is the fuel tax, which accounts for a considerable portion of the tax ratio, are the primary environmental taxes in general.

Environmental taxes offer rewards for people and corporations to incorporate environmental issues into business activities and reduce negative impacts on the environment by internalizing environmental costs (for example, activities that burden the environment will be taxed, whereas activities that contribute to the preservation of the environment will receive a tax break). Because environmental taxes create cash that may be used to fund additional environmental initiatives or reduce other taxes.

Environmental taxes provide cash that can be utilized for environmental preservation or for nonenvironmental purposes. Environmental tax revenues can be used to reduce other taxes such as income tax, business tax, and social insurance premiums (Soares, 2012). Environmental taxes, in principle, provide a pricing incentive to curb ecologically detrimental behaviour. In reality, though, many environmental levies are merely revenue-raising mechanisms with no intention of providing any environmental benefit. Due to these ambiguous definitions, it is easy to misread the computation of environmental taxes (Al-Alawi & Nobanee 2020). Green taxes are imposed in Nigeria on the fuel, infrastructure, health, and environmental assets tax bases. The federal gas tax, as well as provincial taxes on mineral usage and waste management, are examples of green taxes in Nigeria (Galaz et al., 2018).

While it is evident that environmental levies are utilized in Nigeria, the nation still grapples with the urgent need for climate action. Thus understanding the effectiveness of green taxes is crucial for crafting policies that align economic growth with environmental sustainability.

Several studies indicate that green taxes can effectively reduce harmful emissions and promote eco-friendly behavior among consumers and businesses. For instance, a report by the Organisation for Economic Co-operation and Development (OECD) in 2021 highlights how countries that have implemented carbon taxes have seen significant reductions in greenhouse gas emissions (OECD, 2021). Similarly, a study by the International Monetary Fund (IMF) in 2019 demonstrates that carbon pricing mechanisms not only lower emissions but also generate substantial revenue that can be reinvested into renewable energy projects (IMF, 2019). Such findings underscore the potential of green taxes as both an environmental and economic tool.

Moreover, the implementation of green taxes can lead to behavioral changes among consumers, prompting them to reconsider their consumption choices. Research by the European Environment Agency (EEA) in 2020 found that increased energy taxes in European nations resulted in a notable decline in fossil fuel consumption (EEA, 2020). This shift in consumer behavior can significantly contribute to reducing overall carbon footprints and fostering a culture of sustainability. The interplay between economic incentives and environmental stewardship is a key component of the success of green tax policies.

Despite the potential benefits, challenges remain in the equitable implementation of green taxes. Critics argue that such taxes can disproportionately affect low-income households unless carefully designed. A study by the World Bank in 2022 emphasizes the importance of complementary measures, such as rebates or targeted subsidies, to mitigate regressive impacts (World Bank, 2022).

Additionally, successful implementation requires transparent governance and public acceptance. Engaging citizens in the development of green tax policies can enhance their effectiveness and ensure that environmental goals are met without compromising social equity (Dahlström et al., 2020). As nations continue to explore innovative approaches to combat climate change, the role of green taxes in environmental protection remains a vital area of research and policy development.

 

1.2   Statement of the Problem

The implementation of green taxes poses a complex challenge in the context of environmental protection, as their effectiveness can be influenced by various socio-economic factors. While these taxes are intended to reduce harmful emissions and promote sustainable practices, there is significant concern regarding their equitable impact on different income groups. Critics argue that without careful design, green taxes can disproportionately burden low-income households, exacerbating social inequalities (World Bank, 2022). This raises important questions about the acceptability and sustainability of green tax policies, as public resistance can undermine their intended environmental benefits.

 

Moreover, the actual effectiveness of green taxes in achieving measurable environmental improvements varies widely among countries and sectors. A study by the Organisation for Economic Co-operation and Development (OECD) in 2021 notes that while some nations have successfully reduced emissions through carbon pricing mechanisms, others have struggled to achieve significant results due to inadequate implementation and enforcement (OECD, 2021). This inconsistency highlights the need for comprehensive policy frameworks that not only incorporate green taxes but also address complementary measures, such as public awareness campaigns and investment in renewable energy, to ensure that the ultimate goal of environmental protection is realized.Top of Form

 

 

1.3 Objectives of the Study

The main objective of the study is to examine Impact of Green Tax on environmental protection. Specific objectives of the study are:

1. To assess the effectiveness of green taxes in reducing pollution and environmental degradation.
2. To evaluate the economic implications of green taxes on businesses, industries, and the overall economy.
3. To examine the distributional effects of green taxes on different socioeconomic groups and regions.

1.4 Research Questions

To guide the study and achieve the objectives of the study, the following research questions were formulated:

1. What is the correlation between the implementation of green taxes and the reduction of specific types of pollution in targeted industries or regions?
2. What are the short-term and long-term economic costs and benefits of green taxes for businesses and industries?
3. How do green taxes impact low-income households, vulnerable populations, and disadvantaged regions?

1.5 Research Hypothesis

The following research hypothesis was developed and tested for the study:

Ho: There is no significant impact of green taxes on environmental protection, and the implementation of green taxes does not lead to a measurable reduction in environmental harm or improvement in sustainability practices.

1.6 Significance of the Study

The study is important for many reasons. The following are the major stakeholders this paper through its practical and theoretical implications and findings will be of great significance:

Firstly, the paper will benefit major stakeholders and policy makers in the environmental science sector. The various analysis, findings and discussions outlined in this paper will serve as a guide in enabling major positive changes in the industry and sub-sectors.

Secondly, the paper is also beneficial to the organizations used for the research. Since first hand data was gotten and analysed from the organization, they stand a chance to benefit directly from the findings of the study in respect to their various organizations. These findings will fast track growth and enable productivity in the organisations used as a case study.

Finally, the paper will serve as a guide to other researchers willing to research further into the subject matter. Through the conclusions, limitations and gaps identified in the subject matter, other student and independent researchers can have a well laid foundation to conduct further studies.

1.7 Scope of the Study

The study is delimited to Federal Ministry of Environment, Lagos state. Findings and recommendations from the study reflects the views and opinions of respondents sampled in the area. It may not reflect the entire picture in the population.

1.8 Limitations of the Study

The major limitations of the research study are time, financial constraints and delays from respondents. The researcher had difficulties combining lectures with field work. Financial constraints in form of getting adequate funds and sponsors to print questionnaires, hold Focus group discussions and logistics was recorded. Finally, respondents were a bit reluctant in filling questionnaires and submitting them on time. This delayed the project work a bit.

1.9 Organization of the Study

The study is made up of five (5) Chapters. Chapter one of the study gives a general introduction to the subject matter, background to the problem as well as a detailed problem statement of the research. This chapter also sets the objectives of the paper in motion detailing out the significance and scope of the paper.

Chapter Two of the paper entails the review of related literature with regards to corporate governance and integrated reporting. This chapter outlines the conceptual reviews, theoretical reviews and empirical reviews of the study.

Chapter Three centers on the methodologies applied in the study. A more detailed explanation of the research design, population of the study, sample size and technique, data collection method and analysis is discussed in this chapter.

Chapter Four highlights data analysis and interpretation giving the readers a thorough room for the discussion of the practical and theoretical implications of data analyzed in the study.

Chapter Five outlines the findings, conclusions and recommendations of the study. Based on objectives set out, the researcher concludes the paper by answering all research questions set out in the study.

1.10 Definition of Terms

1.  Green Tax

 A financial charge imposed on activities or products that negatively impact the environment, intended to encourage sustainable practices and reduce pollution.

2.  Environmental Protection

Actions and policies aimed at preserving natural resources, ecosystems, and biodiversity, ensuring that environmental health is maintained for current and future generations.

3. Carbon Footprint

 The total amount of greenhouse gases, primarily carbon dioxide, emitted directly or indirectly by an individual, organization, or product, typically measured in carbon dioxide equivalents.

4.  Pollution Reduction

 The decrease in the introduction of harmful substances or contaminants into the environment, often achieved through regulations, innovations, and economic incentives like green taxes.

5.  Sustainable Development

 A development approach that meets the needs of the present without compromising the ability of future generations to meet their own needs, balancing economic growth, social inclusion, and environmental protection.

6.  Ecosystem Services

The benefits that humans derive from nature, including clean air and water, pollination of crops, and climate regulation, which are crucial for sustaining life and economic activities.

7.  Behavioral Change

 The shift in individual or organizational actions and practices towards more environmentally friendly alternatives, often stimulated by economic incentives like green taxes or public awareness campaigns.

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