Policy instruments and implementationwhen they think they can avoid detection, then surely they may also cheat
or lie in order to avoid taxes? The introduction of a landfill tax on waste in
Britain in 1996, for example, led to a huge increase in illegal fly-tipping of
wastematerials to avoid paying duties. An assessment of the Dutch MINAS
manure tax found that the ‘high cost for administration is in part caused by
exploitation of loopholes, fraud, juridical procedures’ (OECD2005a: 5). Thus
eco-taxes still need to be policed. Although the responsibility for this task
may fall to the established revenue collection system of a finance ministry
rather thanaregulatory agency, any savings made are likely to be small.
Similarly, a tradeable permit system also needs to be monitored by a regu-
latory agency to ensure that firms do not exceed their permitted emissions
levels.
These technical and practical reservations are given further credence by
thelack of definitive assessments of the performance of MBIs, although as
new schemes flourish, more studies are appearing. The USA provides the
most reliable evidence about tradeable permit schemes because European
schemes remain in their infancy. US emissions trading has clearly gener-
ated considerable cost savings for firms. One evaluation of the US sulphur
emissions trading system suggests that significant cuts in both emissions
and costs have been achieved: during Phase 1 (1995–9) it is estimated that
savings over direct regulations averaged $358 million per annum, rising
toapredicted $2.3 billion per annum in Phase 2 (2000–7) (Ellerman et al.
2003 :11–18;seealsoCole and Grossman 2005 ). The limited impact of the
programme on acid rain has led to some circumspection about its environ-
mental benefits, although the problem seems to lie with the timid emissions
baseline set by the regulator rather than the operation of the trading scheme
itself (Bryner 2005 :178–82). In Europe, there is a lively new market trading
in carbon permits, but wild price fluctuations – rising from around€7 per
tonne of carbon in January 2005 to just over€30 in April 2006, before col-
lapsing almost overnight to€11 (Financial Times,3May2006) – suggest that
thesystem is still finding its feet amid criticisms that some businesses have
made huge profits from the free allocation of permits and several member
stateshave issued far too many permits.
There is more evidence available regarding eco-taxes, with several success-
ful examples (see Box12.4). Dutch water pollution charges have reduced
organic emissions into waterways at low cost and encouraged firms to intro-
duce cleaner technologies, although similar schemes in France and Germany
have had mixed results (Andersen 1994 ). Swedish sulphur dioxide and nitro-
genoxide taxes have produced significant emission reductions (EEA 1996 :
31). The Swiss heavy goods vehicle fee has greatly increased the efficiency of
heavy goods road transport (OECD2005b). Several waste taxes have proved
successful, including the Irish tax on plastic bags, the Dutch nutrient sur-
plus charge and Danish taxes on waste disposal and batteries (EEA2006a:
7). However, the verdict is not always clear-cut. During the 1990s, many EU
states introduced tax differentiation between leaded and unleaded petrol to