In Mauritius, the government has embraced the objective of a green economy development path.
The country has already come a long way in terms of introducing fiscal policies that promote environmental protection and provide incentive for green investment. The overall fiscal system functions well and revenues from environmental taxes have been increasing. However, there remains potential to rationalize the system and create further fiscal space to support green economic development.
A new UN Environment study identifies options to reform fiscal policies in the energy, transport, waste and water sectors to revise fiscal instruments to better reflect environmental impacts, induce behaviour change and create additional fiscal space for green investments.
The report sets out a series of improvements that can be implemented to rationalise the existing structures and mobilise resources for innovation and investment. Based on these insights, the analysis provides suggestions for fiscal policy reform for the next phase of PAGE support in Mauritius.
Major options that were developed for reform are tax instruments applied to fuels used in electricity generation and transport, and reforms to pricing policies pertaining to waste collection and domestic water. Introducing a more comprehensive carbon tax is expected to mobilise US$2.6 million in 2016-2018, progressively increasing to over US$26 million by 2025. Weighting transport fuel excises more heavily on diesel rather than unleaded fuel is expected to raise US$7.8 million per year, with no significant additional burden to taxpayers.
Water costs are very low in the region, compared with regional costs. Based on this, a progressive water tariff is recommended to reflect the true cost of water and promote a more equitable system of sharing the cost of water.
Resources mobilised through the introduction of the reforms outlined can be directed to green economy investments to maximise impact.
The Mauritius Fiscal Policy Analysis represents one part of PAGE’s involvement in Mauritius. The analysis comes at a key moment of PAGE’s involvement in Mauritius. It expected that on the back of this analysis, the government of Mauritius will take into consideration the recommendations for realisation of Mauritius’ green economy ambitions.
To read more about PAGE’s work in Mauritius, click here.