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					WIOD Conference on Industry-Level Analyses of Globalization and its Consequences
26 May 2010




          Global effects of a
       European environmental
             tax reform
  Christine Polzin (SERI)
  Dr Christian Lutz (GWS)
  Dr Stefan Giljum (SERI)

  www.seri.at
Content



1. Background: The PETRE project

2. The GINFORS Model

3. Results

4. Policy recommendations



                                   2
Content



1. Background: The PETRE project

2. The GINFORS Model

3. Results

4. Policy recommendations



                                   3
Resource Productivity, Environmental Tax
 Reform and sustainable growth in Europe

          What are the global impacts of a
         European environmental tax reform?

                  • Environmental impacts:
                   •Material extraction
                                                           •EU-27
                   •Energy-related CO2 emissions           •OECD
 Environmental
  tax reform in                                         •Emerging
     the EU                                             economies
                  •Economic impacts:
                   •economic growth                     •Rest of the
                   •International trade & sectoral         world
                    competitiveness



                                                     http://www.petre.org.uk/
                                                                         4
Content



1. Background: The PETRE project

2. The GINFORS Model

3. Results

4. Policy recommendations



                                   5
Global INterindustry FORecasting
System (GINFORS)

  GINFORS:
   •  Economy-energy-environment simulation model
   •  Global multi-country approach
   •  Multi-sector approach
   • Links modules for bilateral trade, macroeconomic
     behaviour, industrial output from IO tables and energy
     use and prices
   • Includes a global dataset on material extraction
     (physical data)




                                                              6
Data sources and coverage


                   model type               data sources           global coverage
                                                               50 countries (> 95% of
                                     OECD (BTD, 25 sectors,
                                                               world GDP, trade, energy
                     trade           Services)
                                                               consumption)
                                     UN COMTRADE               2 regions (OPEC, ROW)
                                     OECD IO (41 sectors)
                        input-output                           22 countries (more than
  country models




                                     OECD STAN, SNA DT
                         and sector                            80% of world GDP)
                                     National sources (CN, TW)
                        macro        OECD/IMF                  52 countries
                        energy/CO2   IEA                       52 countries
                        material     SERI                      52 countries
                        population   UN                        52 countries




                                                                                          7
Country coverage




   country models   OPEC ex. Indonesia   ROW

                                               8
Baseline and policy scenarios


  Baseline = Business as usual scenario
   • Socio-economic and economic-environmental relations
     of the past will continue in the future

  ETR scenarios
   • ETR tax in all EU non-ETS sectors = ETS price
   • Aviation included in EU ETS
   • 100% auctioning of power generation ETS permits
   • 50% auctioning of all other ETS permits in 2013,
     100% auctioning by 2020
   • Material taxes (5% ad valorem in 2010, 15% by
     2020)
                                                           9
Policy scenarios


  S1H
  • High energy prices
  • ETR with 100% revenue recycling: all revenues are used to
    reduce the employers’ social security contributions (income
    tax, etc)
  • 2020 EU GHG emissions target (20%) met

  S3H
  •   High energy prices
  •   ETR with 100% revenue recycling
  •   International cooperation
  •   2020 EU GHG target (30%)
  •   Emerging economies introduce a CO2 tax which is recycled
      via income tax reductions


                                                                  10
Content



1. Background: The PETRE project

2. The GINFORS Model

3. Results

4. Policy recommendations



                                   11
GDP continues to grow in all 4 regions
in the baseline scenario


  GDP development in the baseline scenario (average annual growth rates)

                        1995-      2000-      2005-      2010-      2015-
  Average annual         2000       2005       2010       2015       2020
  growth rates
                              In % (based on USD PPP, 2004)
  EU-27                    3.1        1.9        2.2        2.5        2.2
  OECD (non-EU)            3.8        2.6        2.0        3.0        2.9
  Emerging
                           6.2        8.0        8.7        8.3        6.8
  Economies
  RoW                      3.8        4.9        5.1        3.7        2.9
  World                    4.2        4.8        4.4        4.9        4.4

                                                                           12
Global economic weight will shift away
from the old industrialised countries

 Shares in world GDP, baseline scenario

 Shares in world    2000     2005     2010      2015    2020
 GDP                    In % (based on USD PPP, 2004)
 EU-27               25.4     22.4    20.4      18.4    16.8
 OECD (non-EU)       41.3     37.5    33.8      31.2    29.3
 Emerging
                     27.9     31.4    37.0      42.0    46.0
 Economies
 RoW                  5.9      9.2        9.5    9.0     8.5



                                                           13
Global economic growth is only
marginally affected by an ETR
 GDP impacts in different world regions. 3 scenarios (in bn USD 2000, PPP)


                  Total value of Absolute Percentage Absolute Percentage
                       GDP,      deviation of deviation of deviation of deviation of
                   baseline (in   HS1 from     HS1 from     HS3 from     HS3 from
                   billion USD baseline in baseline in baseline in baseline in
                   2000, PPP)       2020         2020         2020         2020


 EU-27                  15,931           -92          -0.6        -297          -1.9

 OECD (non-EU)          27,840            28           0.1          -78         -0.3
 Emerging
                        43,699            53           0.1        -688          -1.6
 Economies
 RoW                     8,033             6           0.1        -266          -3.3

 World total            94,926            -3           0.0       -1,313         -1.4

                                                                                   14
Exports continue to grow in the
baseline scenario

Export developments in different world regions, baseline scenario

                             2000-        2005-         2010-       2015-
Average annual                2005         2010          2015        2020
growth rates                      In % (based on USD, 2000)

EU-27                           3.7          3.1           2.6        2.9

OECD (non-EU)                   7.7          5.1           3.1        2.5
Emerging
                                5.1          9.3           5.4        6.1
Economies
RoW                             8.7          8.3           5.3        5.8


                                                                        15
Export impacts are stronger with
global cooperation

 Export impacts in different world regions, three scenarios
                  Total value
                               Absolute Percentage Absolute Percentage
                  of exports,
                              deviation of deviation of deviation of deviation of
                   baseline,
                               HS1 from     HS1 from     HS3 from     HS3 from
                     2020
                              baseline in baseline in baseline in baseline in
                   (PPP bn
                                 2020         2020         2020         2020
                     USD)

  EU-27              7972.0         -60.1        -0.8%       -264.2        -3.3%

  OECD (non-EU)      5505.1          14.1        0.3%         -29.5        -0.5%

  Emerging
                    11036.0          19.8        0.2%        -159.2        -1.4%
  Economies

  RoW                4913.9           7.4        0.2%         -73.2        -1.5%

                                                                                    16
Resource-intensive sectors loose out

  EU Exports: impacts of scenario SH3
                            10
% deviation from baseline




                             5


                             0


                             -5


                            -10


                            -15


                            -20


                            -25


                            -30




                                        17
  Continuous trend of increasing
  global resource extraction
Global used material extraction of different material categories, baseline

                       120
      billion tonnes




                                    Construction minerals
                                    Industrial minerals
                                    Non-ferrous metals
                       100          Iron ores
                                    Natural Gas
                                    Crude Oil
                                    Coal
                        80          Forestry products
                                    Agricultural products and fish



                        60




                        40




                        20




                         0
                             2000                 2005               2010   2015   2020   2025   2030



                                                                                                        18
Material extraction continues to grow

   Global used material extraction, 3 scenarios
                      85
     billion tonnes




                      80

                      75

                      70                                      Baseline

                      65                                      S1H
                                                              S3H
                      60

                      55

                      50
                           2000   2005   2010   2015   2020


                                                                         19
A European ETR and global cooperation
can decrease material extraction

                  Total
                            Absolute      Percentage      Absolute      Percentage
              extraction,
                           deviation of   deviation of   deviation of   deviation of
              baseline,
                           S1H in 2020     S1H from      S3H in 2020     S3H from
                  2020
                            (in billion   baseline in     (in billion   baseline in
               (in billion
                             tonnes)         2020          tonnes)         2020
                tonnes)

  EU-25              6.8          -0.10       -1.47 %           -0.24        -3.6 %

  OECD
                    18.7          0.02         0.10 %           -1.03        -5.5 %
  (non-EU)

  Emerging
                    31.5          0.01         0.03 %           -2.23        -7.1 %
  Economies
  RoW               24.2          -0.02       -0.08 %           -0.79        -3.3 %
  Global            81.2          -0.09       -0.11 %           -4.30        -5.3 %



                                                                                       20
CO2 emissions remain constant in the
EU but increase elsewhere

   Energy-related CO2 emissions in 4 regions, baseline (bn tonnes)
                    45
   billion tonnes




                    40


                    35


                    30


                    25                                                    RoW
                                                                          Emerging Economies
                    20                                                    OECD (non-EU)
                                                                          EU-27
                    15


                    10


                     5


                     0
                         2000   2005   2010   2015   2020   2025   2030



                                                                                               21
Global CO2 emissions can hardly be
reduced with EU measures alone

                    36
   billion tonnes




                    34

                    32

                    30
                                                            Baseline

                    28                                      S1H
                                                            S3H
                    26

                    24

                    22
                         2000   2005   2010   2015   2020


                                                                       22
CO2 emissions can be substantially
reduced with global cooperation

Impacts of an ETR on energy-related CO2 emissions in HS1 and HS3

              Total CO2     Total      Relative       Total       Relative
             emissions in change in   change in     change in    change in
              baseline, HS1 in 2020   HS1, % in    HS3 in 2020   HS3, % in
             2020 (in Mt)  (in Mt)      2020         (in Mt)       2020

EU-25             3776.3     -318.8       -8.4 %        -722.4      -19.1 %

OECD
                 10244.6       10.4       0.1 %        -1829.1      -17.9 %
(non-EU)

Emerging
                 14835.5        2.3      0.02 %        -2741.9      -18.5 %
Economies

RoW               5854.9        0.4      0.01 %         -141.4       -2.4 %

Global           34526.7     -272.8       -0.8 %       -5398.6      -15.6 %

                                                                             23
Content



1. Background: The PETRE project

2. The GINFORS Model

3. Results

4. Policy recommendations



                                   24
Combating climate change with global
cooperation and global climate treaties



   • Large emerging economies will increase their share in CO2
      emissions

   • Unilateral action by the EU is insignificant in terms of global
      environmental sustainability

   • Participation of all OECD and emerging countries

   • Avoid carbon leakage



                                                                       25
CO2 emission targets are not
sufficient to address climate change

•   Targets to reduce EU CO2 emissions (by 20-30%) are not
    sufficient.

•   Measures are needed to increase resource productivity and to
    limit resource consumption.

•   Focus on CO2 is too narrow (e.g. biofuels, nuclear energy)

•   Address our unsustainable use of resources (root cause of
    climate change)

•   Concerted action
                                                                   26
Shared responsibility between
producers and consumers


  •   Increasing importance of embodied emissions in trade

  •   Multi-regional IO models show that our CO2 emissions would
      be higher (developing countries produce on our behalf)

  •   Distribute costs to reduce GHG emissions between producers
      and consumers

  •   Per capita allocations or global carbon tax




                                                                   27
Address the conflict between
economic and development goals

 •   In important EU policy strategies (“Global Europe”, “Raw
     Materials Initiative”) the goals of access to and supply of raw
     materials and natural resources prevail over the objective of
     their sustainable and equitable use

 •   Increase technical and financial assistance for climate change
     mitigation and adaptation

 •   Placing access to resource efficient technologies outside the
     purview if IPR restrictions into the public domain / international
     public buyouts of patents on such technologies

                                                                          28
           Thank you!

www.seri.at
www.gws-os.de
www.materialflows.net

christine.polzin@seri.at
lutz@gws-os.de
stefan.giljum@seri.at


                           29
Scenarios

  Baseline with low energy prices (LEP) LB:
   • International energy prices: PRIMES 2007 (60 $2005/boe in 2020)
   • GDP and CO2 adjusted to PRIMES 2007/WEO 2007
   • ETS price: 18 Euro2008/t CO2 in 2020
  Baseline HB:
   • Baseline as above but exogenous real oil price is assumed to rise after
     2008 consistent with a $113/boe in nominal terms in 2010 and then to rise
     as in the PRIMES baseline (LEP above).
   • Gas and coal prices follow the oil price.
   • Energy prices consistent with IEA/WEO 2008 baseline
  Scenario 1: LS1
   • 2020 EU GHG emissions target (20%) met
   • Low energy prices (baseline LEP)
   • ETS price = ETR tax rate
   • ETS: 100% auctioning in 2020
   • Material tax (15% ad valorem tax in 2020)
   • 100% revenue recycling: employer’s social security contributions (ETS
     material tax and carbon tax on corp. rev)/income tax (carbon tax on hh)
   • No further policy measures (RES, efficiency package etc.)
                                                                                 30
Scenarios (part II)

  Scenario 2: HS1
   • 2020 EU GHG 20% target met
   • High energy prices
   • CO2 price: 68 Euro 2008/t
  Scenario 3: HS2
   • As Scenario 2
   • 10% recycling in low carbon technologies
     (RES and building insulation)
   • CO2 price: 61 Euro 2008/t
  Scenario 4: HS3
   • As Scenario 2
   • International cooperation
   • 2020 EU GHG emissions target (30%!) met
   • CO2 price: 184 Euro2008/t (OECD)
   • CO2 price: 46 Euro2008/t (emerging economies)

                                                     31

				
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