Fiscal measures for environmental protection
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NTPC established Centre for Power Efficiency & Environmental Protection (CenPEEP) in collaboration with USAID with a mandate to reduce GHG emissions per unit of electricity generated by improving the overall performance of coal-fired power plants.
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In both developed and developing countries, fiscal policy has an important role to play in assuring sustainable use of natural resources and safeguarding the environment. This applies to both the tax and spending sides of the government’s budget. On the former,
Taxes can be used to ensure that prices reflect the full social costs of producing goods and services. This type of pricing is most conducive for growth over the long term. The prices charged for petroleum products, for instance, need to reflect not only the cost of buying or selling them on the world market but also the social costs of the airborne pollution their usage can create and—in the absence of better-targeted instruments, such as toll charges—the congestion associated with motor vehicle use.
A well-designed tax and royalty system is key to ensuring that countries receive a proper share of the rents earned by the exploitation of their natural resources and to ensuring that those resources are not overexploited. For many developing countries, rents from mineral deposits, forestry, or fisheries can be an important source of revenue and one that, with a well-designed tax regime, is compatible with socially appropriate patterns of resource usage. On the spending side.
Some public expenditures, such as assistance to rural energy efficiency and spending on forestry management agencies, directly support more efficient resource use. Subsidies for, or relatively low taxation of, kerosene may also be desirable, since in many developing countries it is used as a household fuel, providing an alternative to deforestation.
Other kinds of spending, however, may inadvertently increase environmental externalities by pursuing objectives that could be better achieved by less damaging means. Subsidies for particular kinds of energy use, for instance, are sometimes intended to serve primarily distributional goals but generate adverse environmental effects that could be avoided. The underlying equity objective could still be met by eliminating such subsidies and spending the resources saved on basic health care or education
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