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Green taxes

The shadow chancellor, George Osborne, is much taken by the concept of environmental taxes. But the idea that revenue from green taxes can substitute for other forms of tax is mistaken. There is an intrinsic conflict between the goals of raising taxes and of making people’s behaviour more eco-friendly. If people do change their behaviour in response to eco-taxes, revenues may be much less than anticipated.

The London congestion charge is a good example. Just before the charge was introduced, Transport for London estimated the net benefits over a ten-year period would be £1.3bn, an average of…

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