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Future Design of Economic Instruments for Fair Energy Pricing

Future Design of Economic Instruments for Fair Energy Pricing. Kai Schlegelmilch* Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Berlin/Germany EP – GLOBE, NEEDS Forum 1: Accepting the Real Price for Sustainable Energy, Belgian Parliament, Brussels 24 th May 2005

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Future Design of Economic Instruments for Fair Energy Pricing

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  1. Future Design of Economic Instruments for Fair Energy Pricing Kai Schlegelmilch* Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Berlin/Germany EP – GLOBE, NEEDS Forum 1: Accepting the Real Price for Sustainable Energy, Belgian Parliament, Brussels 24th May 2005 * Though I normally represent government positions, this presentation is made on my personal capacity.

  2. Examples for Economic Instruments Present: • Liability/Guarantee/Insurance Obligations • Taxes and Charges • Emissions Trading Future: • Liabilities for large scale damages such as climate change • Emissions Trading for SME/Transport/Private Households • Road Pricing for private cars • Congestion Charge/City Toll

  3. Requirements/Criteria forFair Energy Pricing • Polluter Pays/Resource User Principle • competivity and equity concerns • Predictability • Good Rationale • Transparency i.a. of revenue use • Monitoring • Reporting • Task/Sector Sharing of Instruments

  4. Liability/Guarantee/Insurance Obligations • Liabilities for large scale damages such as climate change • Full liability for all energy sources • Set up reporting system on liability schemes and how they affect investment decisions (or how their non-existence does so) • Refer to insurance fees of the private sector which are differentiated according to risks

  5. Taxes and Charges I • Demonstrate tax relation to environmental aspects (CO2, energy, other pollutants) • Take competitiveness and equity concerns into account • Choose mid-term tax approach (e.g. UK-fuel duty escalator-1993-2000, D-ETR-1999-2003, S-ETR-2000-2010) • Transparency and Monitoring of Impacts and Revenue Use by Reporting System

  6. Taxes and Charges II • Use of Revenues can be shown more clearly by provision on the pay slip – as often not understood if used for labour cost reduction • Earmark smaller parts for environmental purposes or name Ecological Tax Reform (ETR) differently • Fiscal Driver may be required to ensure introduction and continuation • However, often schizophrenic attitude: Though market-based instruments are introduced people prefer to ask the “good” government when it comes to revenue spending • People often dislike being “forced” to change behaviour

  7. Emissions Trading • Possibly extend Emissions Trading to SME/Transport/Private – or communicate the role of instrumental task sharing between taxes and emissions trading for different sectors like private households and transport • Free allocation is economically not the best, but may be required for competivity and equity concerns • Monitoring and Reporting is required which is a good element

  8. Road Pricing/Congestion Charge/City Toll • Allow for differentiation according to environmental pollution//Euro norms/fuel consumption • Gain acceptance by first e.g. including the haulier sector • Transparency i.a. of revenue use by new government, used for transport infrastructure • Monitor progress and communicate benefits to the society and various stakeholders

  9. Conclusions • Future Design of Economic Instruments for Fair Energy Pricing may take different forms; but it appears that transparency (internalisation of external costs), monitoring and thus reporting are essential for better acceptance building

  10. Thank you very much for your attention! Contact: • kai.schlegelmilch@bmu.bund.de • Tel.: +49-1888-305-3664 • Fax: +49-1888-305-2349 • http://www.bmu.de • http://www.bmu.de/oekologische-finanzreform (information in D, E, FR, ESP)

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