The Rise of “Green Taxes”: Do They Punish Consumers or Businesses?

Green taxes have become a key tool for financing the ecological transition and discouraging polluting practices. However, their implementation generates intense debate: do companies really bear the cost or do they end up passing it on to consumers? This analysis breaks down the real impact of this environmental taxation.

What are Green Taxes?

Green taxes are levied on:

• CO₂ emissions (carbon).
• Waste production (plastics, electronics).
• Use of natural resources (water, minerals).
• Polluting products (fossil fuels, pesticides).

Stated objectives:

1. Internalize environmental costs: Make polluters pay for them.
2. Incentivize sustainable alternatives: Make dirty options more expensive.
3. Financing green policies: Raising funds for renewable energy or climate adaptation.

Who Really Pays? The Central Debate

Argument: “Companies Bear the Cost”

• Investment in innovation: 70% of large companies have reduced emissions to avoid taxes (MIT 2025 study).
• Competitiveness: Greener products gain market share (e.g., electric vehicles).
• Reversing externalities: Environmental damage previously borne by society is offset.

Counterargument: “The End Consumer Pays”

• Inelasticity of demand: Fuels and basic foods continue to be purchased even if their prices rise.
• Cost transfer: 60% of the plastic tax is passed on to prices (OECD 2024).
• Regressive impact: Low-income households are hit hardest (they spend a higher percentage on energy/food).

Data that Clarifies the Debate

• EU 2025 Study: Only 30% of green taxes are absorbed by companies. 70% are passed on to consumers.
• Exceptions: Highly competitive sectors (e.g., renewable energy) absorb more costs.
• Offsets: 80% of countries return part of the revenue to vulnerable families (green checks).

How to Improve the Equity of Green Taxes

1. Social offsets:
   • Climate revenue: Return per capita revenue (e.g., Canada).
   • Public transport vouchers: To offset fuel price increases.
2. Exemptions for basic goods:
   • Do not apply the green VAT to unprocessed foods or medicines.
3. Investment in alternatives:
   • Subsidize public transport or renewable energy to reduce dependence on pollutants.

Success and Failure Cases

✅ Canada: Carbon tax with green checks reduced emissions without harming purchasing power.
✅ Portugal: Plastic tax funded ocean cleanups (€20 million/year).
❌ France: Yellow Vest protests over fuel tax without compensation.
❌ Mexico: Soft drink tax did not reduce consumption but increased energy poverty.

The Future: Toward Smart Taxes

• AI for pricing: Sensors that monitor emissions in real time.
• Blockchain for transparency: Full traceability of how revenue is used.
• Modulated taxes: Based on consumer income (e.g., progressive carbon tax).

“A green tax without social compensation is just another tax on the poor.” — Joseph Stiglitz, economist.