The First Regional Policy Dialogue: Towards Green Growth in Asia and the Pacific: Eco-efficiency through Green Tax and Budget Reform was held from 8 to 9 November 2005 in Seoul, Republic of Korea and was organized by UNESCAP in collaboration with the Korean Association of Public Finance and Economics (KAPFE) and the Korea Institute of Public Finance (KIPF).

The First Regional Policy Dialogue was attended by more than 30 participants, including representatives of the Ministries of Finance and of Environment of 9 member countries of UNESCAP as well as representatives of the World Bank, Asian Development Bank, OECD, IGES, private sector and research institutes.

The Policy Dialogue explored green tax and budget reform as one of many possible tools and means to operationalize the concept of "Green Growth" and thereby improve the eco-efficiency of economic growth.

Green growth is an increase in GDP that maintains or reinforces ecosystems and their contribution to poverty reduction, health, well-being and quality of life without jeopardizing environmental sustainability. Green Growth is feasible and appropriate in the context of Asia and the Pacific.

The eco-efficiency concept could be a very useful criterion in improving the environmental sustainability of economic development planning. It needs to be more pro-actively applied when activities/projects are developed and implemented.

Revenue neutral green tax and budget reform (GTBR) could be a useful and powerful tool to improve eco-efficiency of economic development since public policy must systematically use prices to drive markets in the desired direction (greater resource efficiency, reduced emissions, more dynamic innovation/new industries).

GTBR is a very direct public policy to influence market prices and internalize the costs of environmental degradation.

In many cases the key concept of GTBR, which is revenue neutrality, is overlooked. There is a need to further promote the concept of revenue neutrality so that governments, industries, public and all stakeholders consider green tax not as an additional tax but rather a shifting of the tax burden. When green tax and budget reform is revenue neutral it is not an additional tax, but rather a shift in the tax base from a tax on income or pension (a good) to pollution (a bad).

There is also a need to further promote the understanding that GTBR, when appropriately designed, brings a double dividend in that it causes economic growth while improving environmental sustainability.

However, there are certain conditions necessary in introducing GTBR. Industry and other stakeholders often object to GTBR because of misperceptions. These misperceptions include the belief that green taxes are additional taxes, that they will reduce industrial and/or international competitiveness and that they are income regressive (benefit the rich more than the poor). These misperceptions must be dispelled through increasing awareness of the successes related to revenue neutrality, improved industrial and international competitiveness and non redistribution of income that have resulted from green tax implementation in various countries.

Green tax may be used in combination with other tools (e.g. eco-labeling, public disclosure, green accounting, legal instruments and many others) to improve the eco-efficiency of economic growth. The design and implementation of green taxes must be country specific.

In Asia and Pacific green taxes are not new; many countries already have a tax on energy, water and other natural resources. However, environmental taxation must be improved to include revenue neutrality and the idea of shifting the tax base. Such changes in policy will benefit countries by improving their environmental quality and economic status.

There is further need for guidance and facilitation of regional cooperation among the countries of Asia and the Pacific. Therefore UNESCAP remains committed to working with partner organizations (KAPFE, KIPF, OECD, WB, ADB, IGES, other institutions, and the private sector) to learn about and promote green tax and budget reform as one of the policy tools necessary to achieve green growth.