North Macedonia : Environmental Tax Reform Options and Outcomes
This paper aims to contribute to the Government’s plans by highlighting key policy options for reforming the tax system to address environmental concerns. It does this through firstly assessing the existing tax system to understand the incentives a...
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| Format: | Policy Note |
| Language: | English |
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World Bank, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/333331623933161040/North-Macedonia-Environmental-Tax-Reform-Options-and-Outcomes http://hdl.handle.net/10986/35862 |
| Summary: | This paper aims to contribute to the
Government’s plans by highlighting key policy options for
reforming the tax system to address environmental concerns.
It does this through firstly assessing the existing tax
system to understand the incentives and measures in place in
relation to environmental issues. It then outlines key gaps
in the tax system, including in relation to the direction of
environmental tax policy globally and in the European Union.
As part of this analysis, the paper outlines several policy
findings, providing suggested enhancements to the existing
fiscal framework to improve environmental performance and
support green industries. In doing so, the paper draws from
the policy principles that underpin a greening of the tax
system, to help guide policy formulation. Indicative impacts
of such policy reforms are estimated for key parameters. The
paper provides this analysis in the context of the existing
policy reforms that are planned and underway, such as the
Tax System Reform Strategy (2021-2025), the Strategy for
Energy Development of the Republic of North Macedonia until
2040 (October 2019), the Strategy on Environment and Climate
Change for the period 2014-2020 (adopted in 2018, developed
in 2014), the National Plan for Ambient Air Quality
Protection (2012), and the 2017 National Emissions Reduction
Plan prepared for commitments under the Energy Community.
The paper focuses on the energy sector, specifically on the
environmental issues associated with fuel use and how these
are influenced by the taxation system. The use of energy, in
particular the burning of fossil fuels and fuelwood, is the
largest contributor to both greenhouse gas emissions and air
pollution in North Macedonia. These have important effects
on the environment, human health, and the economy. Reducing
emissions from the energy sector is critical to North
Macedonia meeting its emissions reduction target of 51
percent below 1990 levels by 2030, set out in its enhanced
Nationally Determined Contribution (NDC) under the Paris
Agreement. The enhanced NDC along with North Macedonia
signing of the Sofia Declaration on the Green Agenda for the
Western Balkans3, represents a significant shift in climate
policy ambition and appetite for carbon pricing. |
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