In the practice of environmental policies an increasing number of Western European countries have implemented taxes based on energy/carbon content of the energy products and services (Sweden, Norway, The Netherlands, Denmark, Finland, Austria, Germany and Italy). Several other countries, like Switzerland, France and the United Kingdom, are currently discussing proposals for their implementation. If the EU countries introduce more stringent emission charges and taxes on energy products (and the derived "implicit" carbon taxes), then they impair their comparative price advantages for energy/carbon intensive commodities (i.e., iron ore, steel, mineral fertilisers, petrochemical products, electricity, etc.). Exports of these commodities immediately fall, and soon domestic production will be also reduced. Finally, a re-allocation of resources into de-carbonised (i.e., environmentally benign) sectors will take place and, as a result, environmental quality in these countries will improve. What kind of structural adjustment will take place in the country like Ukraine that does not pursue (for several reasons) energy and carbon taxation? Obviously, that its comparative price advantages will rise and it will increase the production of energy/carbon intensive (i.e., environmentally adverse) goods. As a result, a re-allocation of domestic resources and additional foreign investments will occur in favour of energy and carbon intensive industries (see table 1 in the previous section). Finally, environmental quality in the country will worsen. Unfortunately, a few people in the Cabinet of Ministers of Ukraine (including the Ministry for the Environment) do understand that environmental policy of foreign countries, say European Union, can affect environmental quality in Ukraine. This comes about by industrial specialisation and trade. Unconditionally, such policy is fraught with further environmental deterioration due to increase of SO2, NOx and other local emissions. |