Alex Moyem Kombat: (kombatalex@yahoo.com) Senior Revenue Officer of the Ghana Revenue Authority but currently on study leave pursuing a PhD study in Environmental Taxation in Ghana within the context of the PhD Programme in Environmental and Resource Management at the Brandenburg Technical University, Cottbus-Senftenberg. I hold MSc in Environmental and Resource Management, BA (Hons) in Economics and Geography and Diploma in Taxation.

Theme: A1 Global Commons

 Economic Analysis of Petroleum Taxes in PollutionControl and Prevention in Ghana Abstract

Petroleum taxes are increasingly being used all over the world for pollution control and prevention,oil resource management and for revenue purposes. For sustainable development, countries are expected to use petroleum products in such a way that, it does not comprise the ability of future generation to improve their lives and the environment. In line with this, several countries have introduced various taxes on petroleum products to discourage their excessive use to conserve oil resources for sustainable development. Petroleum taxes have become the most common forms of environmental taxes in the European Union (EU), Organization for Economic Co-operation and Development (OECD) and non-OECD including Africa. In Ghana,petroleum excise tax has become an important excise tax in terms of revenue and environmental and resource management. The tax was first introduced in 1986, but was redesigned as part of the petroleum price build-up concept in 1989 to raise additional public revenue and cause users of the petroleum products to face the external costs related to traffic congestion and emissions. With respect to the environmental purposes of the tax, certain specific objectives were to be achieved. Among these were: (1) to reduce domestic consumption of fuel products for sustainable development, (2) to reduce air pollution that emanate from road transport, and (3) to reduce road traffic congestions on urban highways and arterials. Although authorities did not set quantitative environmental objectives for the tax, the objectives could be quantified to evaluate the goal attainment.

Air pollution due to excessive use of petroleum products continue to pose health and environmental threat to Ghana. Many Ghanaians contract cardiovascular and other diseases daily which are partly attributed to air pollution. This affect productivity and its subsequent impact on economic development.Equally important in this respect, is the phenomenon of climate change and its impact on Ghana regarding changes in weather and climate patterns, rising sea level and weather related disasters which posed risks to agriculture, food and water supplies. Furthermore, excessive use of the products calls for financial resources to import the products thereby hurting other sectors of the economy. The introduction of the petroleum excise tax was seen as a way of solving the environmental and health risks associated with air pollution caused by emissions and help Ghana conserve oil resources for sustainable development.

However, as in many countries, the Ghanaian petroleum taxes are not Pigouvian, there is no attempt to identify the marginal external costs and optimum level of the tax. Instead, the government's intention is to set the tax rates that would help change the behaviour of consumers towards pollution control to improve environmental quality using market incentives. Setting the tax rates to reflect the environmental damage ensures that prices faced by Ghanaian consumers reflect the environmental cost of their actions. However, despite the prospects and potential of the tax in environmental and oil resource management in Ghana, the economic analysis of the tax has not been carried out. Thus, the purpose of the study is to analyse the petroleum excise tax using the criterion of goal attainment. In addition, the study aims at helping Ghana harness the optimal potential of the tax in pollution control and prevention.

To do this, the qualitative research methodology was adopted where semi-structured interviews were conducted with relevant stakeholders who were selected using purposive sampling technique. The sampling method was adopted mainly because the information required by the author could only be provided by certain experts, top management (managing/chief directors, chief executive officers and commissioners) and other key personnel from the stakeholder institutions who possessed requisite knowledge on the goal attainment of the tax. Additionally, existing statistics, institutional statements and reports, newspaper articles and studies of relevant institutions/individuals were used. The interviews were analyzed qualitatively using the transcription software f4. Additionally, Time series and Stata 9 software were employed along with descriptive statistics to assess the goal attainment of the tax.

Goal attainment, sometimes also called environmental performance or ecological precision criterion was used as framework to assess the tax. Goal attainment measures the capacity of an environmental policy to accurately reach its set goals and objectives. With respect to information asymmetry and flexibility of environmental policy decision makers, it needs to be said that normally a divergence between the target and actual values achieved occur. Usually environmental policy is effective if the goal it pursues is achieved. The criterion has a long history and can be traced to goal-attainment model developed by Ralph Tyler in 1950. The rationale behind this model is based on the question are the results in line with the goals. The fundamental aim of a sound evaluation is to judge a policy's merit, comparative value, wide-ranging significance, and overall worth of its goals.

Goal attainment involves turning goals into measurable objectives and determining how they have been realized in practice. Environmental tax policy goal (s) should be measurable, attainable, specific, time-based, energizing and relevant. However, the quantitative factors should not dominate qualitative factors, as not every goal might be quantified. Further, important for economic assessment is that, all policy instruments including an environmental tax can be used to achieve the same environmental goals. This however depends on ecological effectiveness of each policy. Since goals are statements of desire outcomes for any activity, when all of the objectives of an environmental tax are achieved the goals are considered to be achieved. Goal attainment of environmental tax involves performance measures put in place to achieve the policy specific objectives and determining the status and progress as well as the trend of the policy goals which strengthens the capabilities of the tax policy in achieving its set goals.

The Ghanaian petroleum tax is established to set incentives toward changing consumer behaviour towards the use of the petroleum products considered environmentally unfriendly. Their ecological goals would be to reduce air pollution from petroleum products and help reduce excessive use of the fuel products. Therefore as a step in this direction, the tax goals were defined in Ghana's Ministry of Finance memoranda that accompanied the tax bills to Parliament of Ghana. Although, tax goals were stated in qualitative terms, they were to help achieve the quantitative environmental targets set out in the Millennium Development Goal (MDG) 7. Therefore, the goal of the petroleum tax is to reduce air emissions from road use by 35% by 2015. In order to assess achieved goals of the tax, it was necessary to have reports and values from earlier years (i.e. before the implementation of each tax) so that they could be compared to see to which extend they achieved their goals and specific objectives.

The analysis revealed that the tax has not achieved its goals in terms reduction in petroleum consumption, pollution control and traffic congestion. This is because of: (1) unreliable nature of public transport as alternatives to many cars on the Ghanaian roads, (2) increase access of workers to car loans and general wage and salary increments, and (3) inelastic demand of the motor fuel products. It is against this backdrop that, the paper makes a number of recommendations that could help reduce fuel consumption for sustainable development.

Keywords: Economic analysis, pollution control, sustainable development, petroleum taxes, Ghana

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