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Fiscal Instruments for Environment and Climate Change: Experience from Indian States

Several Indian states have already levied taxes on different polluting substances and activities. However, little is known about their operational mechanics and performance to date. This policy brief series compiles experiences from some of these states. In states such as Sikkim and Maharashtra, these fiscal instruments to address environment and climate issues have been in place for several years, while others like Goa have very implementation. There is wide diversity in the nature of polluting substances on which the taxes have been imposed, the rate of such taxes, the manner in which the funds collected have been disbursed, and the purposes for which they have been utilised. This makes it difficult to compare performances of these instruments among different States. However, based on the experiences from these states, the authors identify some best practices emerge that states should consider while designing and implementing fiscal instruments to address environment and climate change concerns.