Oosterhuis, F., Dodoková, A., Gerdes, H., Greño, P., Jantzen, J, Mudgal, S., Neubauer, A., Rayment, M., Stocker, A., Tinetti, B., van der Woerd,Varma, A. , (2008).

Summary
This study deals with the likely impacts of differential VAT rates for specific products with recognised environmental benefits. Applying a reduced VAT rate to environmentally preferable products while taxing the less preferable ones at the standard rate could lead to a relative price reduction for the ‘greener’ product and thus stimulate the demand for this product. Likewise, increasing the VAT rate on environmentally harmful products that are currently taxed at a reduced rate might also steer demand and supply in a more sustainable direction.

The main research question was how producers, retailers and consumers would change their behaviour in response to the introduction of reduced VAT rates for ‘greener’ products and to the increase of reduced rates on ‘non-green’ products to the standard rate. This question has been addressed in various ways: through a literature survey, by reviewing experiences with previous and existing (environmentally motivated) VAT reduction and other subsidy schemes, and by directly contacting stakeholders. Five case studies have been carried out as illustrations and in-depth explorations of the posssible impacts. Interim results of ongoing parallel studies on related subjects have been taken into account.

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