THE UN-crafted sustainable development goals (SDGs) and Paris Agreement on Climate Change are set to alter tax revenue flows in varied ways. The alteration would result from changes in both the taxation and non-tariff norms governing production and usage of different materials.

The impact of alteration would perhaps be the most significant in the domain of fossil fuels and their derivatives notably plastics. Certain countries have either levied taxes or are likely to do so in the coming years to curb use of plastics and to facilitate their recycling. Most countries have already imposed non-tax regulations to discourage plastics usage, thereby impacting tax revenues.

The restrictions on consumption of one material facilitate increase in the demand for competing materials. In the case of plastics, the substitutes are aplenty - paper, natural fibres-derived materials, wood and aluminium, depending on the application.

Plastics are largely produced from intermediates derived from oil, gas and coal. The suppression in the demand for plastics would thus ultimately impact the entire value chain of fossil fuels. The revenue impact would also be influenced by mandated shift in electricity generation from fossils to renewable sources of energy. Same trend applies to regulatory shifts in petrol & diesel-driven vehicles to electricity-powered ones.

This issue has been aptly flagged in a White Paper titled 'Thinking Strategically: Using Resource Revenues to Invest in a Sustainable Future' released by World Economic Forum (WEF) on 21 February 2019.

The Paper says: "If demand for fossil fuels fall over time, so will their market value. Existing projects will become less profitable, if they even remain viable, tax revenues will decline, existing skill sets will become less useful, and the general prospects for continued economic development and prosperity will diminish".

It adds: "In addition to spurring investment and growth in renewable energy and EVs, the imposition of carbon taxes, cap-and-trade schemes and other forms of carbon prices could drastically affect the demand for fossil fuels. This, in turn, would reduce the value of these assets and potentially force a majority of fossil fuels to be left in the ground".

Some multilateral institution should thus fund regular studies to assess & forecast the impact of all environmental taxes on tax revenue buoyancy at local, provincial, national and global levels.

Would haphazard imposition of such taxes disrupt economic activities including global trade of commodities & supporting industries such as logistics? Would this, in turn, lead to moderation in tax collections? Would that cause funding constraint for SDGs? Many more such issues require comprehensive study.

With this big picture in view, focus now on special taxation of plastics. This initiative is a step towards the 12th goal of the SDGs. It calls for sustainable consumption and production patterns. Unveiled in 2015, all countries have to strive to achieve 17 SDGs by 2030.

Last month, The United Kingdom Government started public consultation on its budget proposal to introduce 'Plastic Packaging Tax' (PPT) to discourage single-use plastic (SUP) and the resulting waste.

PPT will apply to businesses that produce or import plastic packaging which uses less than 30% recycled content. This regulation would be implemented with effect from April 2022. PPT will be set at a rate that provides a clear economic incentive for businesses to use recycled material in the production of plastic packaging.

After factoring in responses to the consultation, the government will publish draft legislation for consultation in 2020.

Like Brexit-mode UK, European Union (EU) is working "to make better use of taxation and other economic instruments" for promoting use of recycled plastics and for improving plastics waste collection.

This approach is mooted in its 'European Strategy for Plastics in a Circular Economy' adopted in January 2018.

The Strategy says: "Member States' decisions on taxation and public procurement will also play a vital role in supporting transition and steering investments"

It adds: "Internalising the environmental costs of land filling and incineration through high or gradually rising fees or taxes could improve the economics of plastic recycling".

Prior to this, EU had issued a directive on reducing the consumption of lightweight plastic carrier bags (LPCBs) in April 2015. It asked Member States to use economic instruments such as pricing, taxes and levies. Several countries have thus already imposed taxes on lightweight plastic bags in way that discourages the consumption.

The Directive calls for reduction in LPCBs' annual consumption to 90 bags per person per year by 31 st December 2019 and to 40 bags by 31st December 2025.

Much before SDGs & Paris Agreement were put in place, Ireland pioneered taxation of plastic bags to discourage their use.

According to a study on plastic bags published last year by Surf rider Foundation Europe, "In Ireland, first country that introduced a tax on plastic bags back in 2002 (of €0,15 and then €0,22), the use of plastic bags has dropped by 90%".

The existing initiatives for taxation of plastics are considered inadequate by a report 'The Price is Right...Or Is It?-The Case for taxing plastic'. It was published by New Economics Foundation in September 2018 at the behest of Zero Waste Europe & certain other European environmental NGOs.

As put by the Report, "There is a strong imperative for the European Union to actively consider an ambitious set of taxes on the use of plastic".

It has identified five possible types of plastic tax and discussed their theoretical advantages and disadvantages.

According to the Report, the primary purpose of a plastic tax should be to change behavior of consumers. In the short term, a new plastics tax could generate significant revenue. Government's reliance on it over the long term could, however, lead to "perverse consequences that drive policy-makers to oppose ambitious action to reduce usage".

The Report has rightly called for more research to explore further the practicalities and design of a range of taxation options. The Research should include modeling of behavioural changes in response to different tax rates levied at different parts of the plastics chain, from production to consumption.

A comprehensive approach to plastic taxes and other environmental imposts can help all countries to achieve objectives with minimal disruption to all. Such study would also help developing countries currently bogged in disjointed tariff and non-tariff initiatives.

The Organisation for Economic Co-operation and Development (OECD) contends that "A mix of policy instruments and approaches will be required to incentivise design of more sustainable plastics".

In background paper captioned 'Policy Approaches to Incentivise Sustainable Plastic Design ' released during May 2018, OECD suggested that taxes and fees can be used as a market signal to reduce the use of certain products, materials or

chemicals, or certain applications of materials or chemicals.

The Back grounder cites the example of a popular plastic in Denmark. It applies a tax to certain soft polyvinyl chloride (PVC) items, with rates varying according to whether phthalates or other substances are used as softeners.

Some ASEAN Member States levy or plan to plastic taxes to curb plastic use, according to a Brief titled 'Managing Packaging Waste in the ASEAN Region' issued by Germany's leading development agency, GIZ, in November 2018.

The countries that have already levied plastic or environ tax include Indonesia, Vietnam and Malaysia.

In the United States and certain other countries, taxation of plastic bags is left to local government or to the provincial government.

Maharashtra Government in India, for instance,, last year notified levy of refundable cess on PET water bottles to prevent littering and facilitate waste collection for recycling. The cess of Rs 1 or 2 per bottle depending on its capacity is to be refunded to customer by the retailer after return of empty bottle.

Indian Government has for over two decades statutorily mandated use of jute bags for packing of commodities such as fertilizers. It has also resolved to ban single-use plastics by 2022. The Government has not yet hiked Good and service tax (GST) to a level that discourages plastic usage, in spite of demand from few quarters for levying sin tax on plastics.

The issue of Plastics taxation is expected to figure at the fourth session of United Nations Environment Assembly to be held at Nairobi for five days ending 15March2019.

The Draft Ministerial Declaration of the Assembly says: "We will decisively address the damage to our ecosystems caused by the unsustainable use and disposal of single-use plastic products, including by phasing-out most problematic single-use plastic products as early as 2025, and we encourage the private sector to find affordable and eco-friendly alternatives".

Environmental activists should, however, not alone guide taxation of plastics. Revenue authorities should be consulted thoroughly in designing a comprehensive tax regime for plastics. What applies to plastic taxes equally well applies to other environmental imposts. The goal of generating adequate resources to sustain public welfare and governance should not get compromised for the sake of environmental activism.