Tax rates by dfhdhdhdhjr

VIEWS: 3 PAGES: 19

									TAXBEN
                                                    TAXBEN WP5
 TAXBEN and gloabl warming




                             Climate change policies and taxation




                                        Paul Veenendaal




November 27
2006,
Brussels
TAXBEN
                                       Policy challenges in abating
                                                    global warming
                              Post-2012 climate policy development
 TAXBEN and gloabl warming




                                ► optimal timing and the additional costs of late action
                                  (ZEW/CPB)
                                ► policy scenario’s focussing on
                                    – key players (ZEW)
                                    – USA participation in the wake of the Californian
                                      initiative (CPB)
                              R&D in less-polluting energy technologies
                                ► climate policies and (endogenous) economic growth
                                  (ETLA)
                              Cap-and-trade and energy tax reform
                                ► EU-ETS and additional energy taxation (ZEW)
November 27
2006,                           ► EU-ETS and the impacts of modifying existing taxes
Brussels
                                  (CPB)
TAXBEN
                                      R&D in less-polluting energy
                                              technologies (ETLA)
                              Approach: theoretical paper assessing the
 TAXBEN and gloabl warming




                               impacts of an emissions cap on induced R&D
                               with numerical model calculations
                              Some conclusions
                                ► Exogenous technology
                                   – Carbon leakage lowers negative impact of the
                                     cap on economic growth
                                ► Endogenous technology with permit imports
                                   – The higher the permit price, the higher the level
                                     of induced R&D will be (social planner case)
                                   – The higher the permit price, the lower the rate of
                                     R&D subsidization will need to be (market
November 27
2006,
                                     economy case)
Brussels
TAXBEN                        EU-ETS and additional energy taxation
                                                             (ZEW)

                              Approach: counterfactual simulations with EU-
 TAXBEN and gloabl warming




                               27 partial equilibrium model assessing
                                ► the impacts of introducing a unilateral carbon tax
                                  within the EU-ETS
                              Conclusions: such a tax
                                ► has no impact on EU emissions
                                ► always adds to total emission reduction costs
                                ► generally increases costs for the country introducing
                                  the tax (unless it is a huge permit importer)
                                ► can not be justified from the point of climate change
                                  policy

November 27
2006,
Brussels
TAXBEN                       ETS-ETS and the differential impacts of
                                   modifying existing taxes (CPB)

                              Approach: counterfactual simulations with
 TAXBEN and gloabl warming




                               global applied general equilibrium model
                               WorldScan, assessing the impacts of energy
                               tax reforms with the EU-ETS in place, in
                               particular
                                ► the benefits of tax harmonization, relative to cap-and-
                                  trade
                                ► the overall abatement efficiency of the EU system
                                  (delineation of regulated sector), given existing taxes
                                ► the benefits of revenue recycling if permits are
                                  auctioned
                              Focussing on the impacts on economic
November 27
2006,                          welfare, ... but not neglecting other political
Brussels
                               concerns
TAXBEN
                                                                           EU ETS

                              First 2005-2007 phase in place with a focus on
 TAXBEN and gloabl warming




                               large combustion installations (covering almost
                               half of EU CO2 emissions)
                              Nonregulated sector (firms/households) to be
                               addressed by other means (taxes, licenses,
                               prescriptions, agreements, (relative) caps)
                                ► sum total of policy impacts is summarized by a
                                  separate carbon tax in WorldScan
                              CDM-credits may need to come to the rescue
                              Next 2008-2012 phase may
                                ► extend to more sectors and other greenhouse gases
November 27                     ► rely to a greater extent on auctioning (respecting a
2006,
Brussels                          ceiling of 10 percent)
TAXBEN
                                                     Existing energy taxes

                              Motives for energy taxes
                                 ►
 TAXBEN and gloabl warming




                                   optimal import tariff
                                 ► road use charge
                                 ► limiting road traffic
                                 ► stable source of government revenue
                              Motives for energy tax differentiation
                                 ► tax competition (energy-intensive, open sectors are taxed
                                   least)
                                 ► equity concerns (coal, household supplies in the UK)
                              Carbon taxation to combat global warming obviously has
                               not been a motive, …
                              …, as taxes are widely diverging by energy carrier,
                               energy user and member state and are not related to
November 27
2006,
                               CO2-emissions
Brussels
TAXBEN
                             Primary energy taxes by sector, in
                                               euro/tCO2, 2001
 TAXBEN and gloabl warming




                             180

                             160

                             140

                             120

                             100
                                                                                                                               EU-15
                              80
                                                                                                                               New members
                              60                                                                                               EU-25

                              40

                              20

                               0
                                   Agricul-   Minerals Electri-city Energy Chemical      Consu- Transport Other        All
                                    ture      and fuels             intensive products   mer and          services   sectors
                                                                                          capital
                                                                                          goods
November 27
2006,
Brussels
TAXBEN
                                    Reference cap-and-trade case for
                                 counterfactual simulations (ETSFull)

                              Caps are imposed on all agents
                              2008-2012:
 TAXBEN and gloabl warming




                                ► Kyoto-ceilings for Annex I (except USA and
                                  Australia)
                                ► EU Burden Sharing Agreement; 10% of permits is
                                  auctioned and revenue recycling is lump-sum
                                ► Free permit trade within EU-25 only; no use of CDM
                              2013-2017:
                                ► EU-25 takes another Kyoto-step; no Burden Sharing
                                  Agreement; 100% of permits is auctioned annually
                                  and revenue recycling is lump-sum
                                ► Other Annex-I decreases cap by 1% each year from
                                  2012 emissions
November 27                     ► Free permit trade within EU-25 only; no use of CDM
2006,
Brussels                      2018-2020: caps are frozen at 2017 levels
TAXBEN
                                   General equilibrium impacts of
                                                    cap-and-trade
                              Emission price
 TAXBEN and gloabl warming




                                ► lowers fossil fuel usage
                                ► lowers fossil fuel prices
                                ► lowers energy tax revenue
                                ► raises purchase prices
                              Higher purchase prices
                                ► lower real remunerations of factors
                                    – lower factor supplies
                                    – lower factor tax revenue
                              If (part of) emission permits are auctioned
                               revenue recycling may mitigate the negative
November 27
2006,
                               impacts on economic welfare
Brussels
TAXBEN
                                           Cap-and-trade versus tax
                                                     harmonization
                              Cap-and-trade imposed: ETSFull
                              Improve abatement efficiency of existing taxes
 TAXBEN and gloabl warming




                               by tax harmonization
                                ► make energy taxes uniform in terms of carbon
                                  taxation, keeping energy tax revenue at baseline
                                  levels as a % of GDP
                                    – at he national level
                                        – Sepbc: separately for consumers and
                                          producers
                                        – Allbc: same carbon tax for consumers and
                                          producers
                                    – at he EU-25 level
                                        – Sepeu: separately for consumers and
November 27                               producers
2006,
Brussels                                – Alleu: same carbon tax for consumers and
                                          producers in all member states
TAXBEN                                        Cap-and-trade versus tax
                                      harmonization, EU-25 emissions in
                                                      Gt CO2, 2001-2020
                             3,8
 TAXBEN and gloabl warming




                             3,7
                             3,6                                        EtsFull
                             3,5                                        Sepbc
                             3,4                                        SepEU
                             3,3                                        Allbc
                             3,2                                        AllEU
                             3,1
                              3

November 27
                                   2001 2004 2007 2010 2013 2016 2019
2006,
Brussels
TAXBEN                                     Cap-and-trade versus tax
                                    harmonization, relative equivalent
                                                        variation,2020
 TAXBEN and gloabl warming




                             0,4

                             0,2

                               0

                             -0,2

                             -0,4                                             EU-15

                             -0,6                                             New members
                                                                              EU-25
                             -0,8

                              -1

                             -1,2

                             -1,4
                                    EtsFull   Sepbc   SepEU   Allbc   AllEU
November 27
2006,
Brussels
TAXBEN
                                             Cap-and-trade versus tax
                                           harmonization, conclusions
                             Conversion of existing energy taxes to carbon
 TAXBEN and gloabl warming




                             taxes
                               Easily outperforms cap-and-trade in emissions reduction
                               Generally also outperforms cap-and-trade in terms of
                                economic welfare
                                  ► EU-15 even earns a strong double dividend if uniform
                                    carbon taxes are imposed (either by member state or EU-
                                    wide)
                                  ► New member states lose however from EU-wide
                                    harmonization, relative to cap-and-trade
                               Is not a viable policy alternative to cap-and-trade
                                  ► expands oil use and road traffic
November 27                       ► has large distributional impacts
2006,
Brussels
TAXBEN
                                  Overall abatement efficiency of
                                     the EU system, conclusion
                              Extending the EU-ETS to all sectors except
 TAXBEN and gloabl warming




                               transportation reduces economic welfare,
                               relative to the EU-ETS

                                ► as it concentrates existing taxes in the nonregulated
                                  sector
                                   – with an additional carbon tax imposed
                                        – tax distortion increases even further
                                        – reducing the real net wage especially in the
                                          new member states
                                ► but: potentially lower administrative costs and higher
                                  auction revenue for recycling have been neglected
November 27
2006,
Brussels
TAXBEN
                                The potential benefits of revenue
                                                        recycling
                              Assessed within the setting of an extended EU-ETS
                               (ETSext)
 TAXBEN and gloabl warming




                              Use permit revenue to reduce labour taxes (ETSextlab)
                                 ► keeping energy tax revenue including permit revenue at
                                     baseline levels
                              Use permit revenue to reduce primary energy and
                               electricity taxes in the regulated sector (ETSextely)
                                 ► again keeping energy tax revenue at baseline levels
                                 ► recycling in this way will
                                     – raise the efficiency of the EU-ETS (cf. ZEW-paper)
                                     – raise the permit price
                                     – foster new technology adoption and innovation (cf.
November 27                            ETLA paper)
2006,
Brussels
TAXBEN
                             Revenue recycling: relative equivalent
                                 variation and labour supply, 2020
 TAXBEN and gloabl warming




                                     Rel. eq. variation                    Labour supply

                                0
                                                                    0,4



                             - 0,2                                  0,2



                                                                      0
                             - 0,4                                                                          EU-15
                                                                                                            New member states
                                                                    -0,2                                    EU-25

                             - 0,6


                                                                    -0,4


                             - 0,8
                                                                    -0,6
                                     ETSext   ETSextlab ETSextely          ETSext   ETSextlab   ETSextely




November 27
2006,
Brussels
TAXBEN
                                      Potential benefits of revenue
                                           recycling, conclusions
                              Recycling benefits belong to the weak double
 TAXBEN and gloabl warming




                               dividend category
                              Of the two options analysed reducing labour
                               taxes has the largest benefits, as it raises the
                               real net wages and labour supplies in all
                               member states
                              Recycling revenue to reduce existing primary
                               energy taxes in the regulated sector and taxes
                               on the use of electricity raises the permit price
                                ► bringing abatement costs more in line with those of
                                  the nonregulated sector
November 27                     ► potentially fostering the advent of new technologies
2006,
Brussels                          in power generation
TAXBEN
                                           Summary of conclusions

                              Conversion of existing energy taxes to uniform
                               carbon taxes is a powerful instrument (for
 TAXBEN and gloabl warming




                               emissions reduction and economic welfare)
                               relative to cap-and-trade; yet, it is not an
                               attractive policy alternative
                              In reforming energy taxation the position of the
                               new member states deserves special attention
                              Given existing energy taxes, the inefficiencies
                               involved in delineating the regulated sector are
                               relatively minor
                              Revenue recycling is beneficial, relative to
                               recycling in a lump-sum fashion; hence, from
November 27                    this point of view, auctioning of permits is to be
2006,
Brussels                       preferred to grandfathering

								
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