AUTHORS: Tim Gore – Jesus Urios – Michaela Karamperi

EU Member States with greener tax systems tend to also have more progressive tax systems and lower inequality. Opportunities for fair, green tax reform are being missed in the recovery from COVID-19.

Tax systems across the EU are, overall, neither green enough nor fair enough. But Member States with greener tax systems – where polluters pay for a bigger share of the costs of their environmental damage – also tend to have more progressive tax systems and lower inequality. There is substantial scope for progressive environmental tax reform in many Member States, with opportunities in Central and Eastern (CE) Member States in particular, to shift taxes away from lower-income labour towards both the environment and higher-income earners.

However, this paper shows that only a few Member States have included environmental tax reforms in their National Recovery and Resilience Plans (NRRPs), and those that have done so are among those with the greenest and fairest tax systems already. The European Semester process should put more emphasis on green and fair tax reform in all Member States to underpin a just transition to a carbon-neutral and more equal EU.