Citation:

Praanjal Singh, Apoorv Ranjan, Samridha Varmani. "Taxing India's Way to a Greener Future: A Progressive Regime" International Research Journal of Economics and Management Studies, Vol. 5, No. 8, pp. 11-25, 2026. Crossref. https://doi.org/10.56472/25835238/IRJEMS-V5I8P102

Abstract:

In response to increasing environmental challenges, this paper proposes a progressive green tax policy that targets producers to enable a reduction in carbon emissions while maintaining production incentives. Carbon pricing is widely discussed as one of the most cost-efficient mechanisms for internalising environmental externalities. The paper addresses a persistent gap in existing frameworks by integrating firms' revenue levels into the emission tax structure, ensuring that tax burdens scale with financial capacity rather than being applied uniformly. The tax is designed to create proportional financial disincentives for both large and small firms. The framework adjusts tax incidence based on firms' relative revenue positions within an industry and thereby aligns environmental responsibility with economic capacity. This approach is evaluated through an illustrative calibration using firm-level data from the Indian cement industry, comparing tax incidence under the proposed regime with that under existing flat-rate levies. The study identifies and seeks to mitigate shortcomings of prior tax regimes, and it examines implementation considerations specific to the Indian context. By integrating theory, mathematics, and empirical illustrations, this paper seeks to contribute to the creation of an environmental tax policy which is not only efficient but also equitable and administratively feasible.

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Keywords:

Ability-To-Pay, Carbon Border Adjustment Mechanism, Carbon Pricing, Cement Industry, Emission Intensity, Environmental Taxation, Green Tax, India, Pigouvian Taxation, Progressive Taxation, Revenue Normalisation.