Taxation and the circular economy: perspectives and pitfalls with a specific focus on the Italian experience

There is a broad and long-lasting consensus regarding the relevant role of fiscal policy and the tax system for promoting environmental protection and sustainable development. More recently, specific attention has been given to ‘circular taxation’: i.e. the use of taxes and other levies to reduce material consumption and the related embodies emissions. Our analysis focuses on the Italian experiences, presenting the different types of taxes/charges that have been implemented across the product lifecycle to promote activities consistent with a circular economy. Results show how environmental taxes are often unevenly applied, with the predominance of taxes on energy and transport, while a lower attention is given to externalities generated at the beginning and at the end of value chain. It is therefore important that a balanced and more horizontal taxation of polluting activities prevents the phenomenon of problems displacement. Moreover, an opaque and relevant amount of tax expenditures detrimental to the environment contributes in several cases to creating unsustainable effects that contradict the CE objectives