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Global effects of a European environmental tax reform

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). Content. Background: The PETRE project The GINFORS Model Results

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Global effects of a European environmental tax reform

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  1. WIOD Conference on Industry-Level Analyses of Globalization and its Consequences 26 May 2010 Global effects of a European environmental tax reform ChristinePolzin (SERI) Dr Christian Lutz (GWS) Dr Stefan Giljum (SERI)

  2. Content • Background: The PETRE project • The GINFORS Model • Results • Policy recommendations

  3. Content • Background: The PETRE project • The GINFORS Model • Results • Policy recommendations

  4. Environmental tax reform in the EU • EU-27 • OECD • Emerging economies • Rest oftheworld Resource Productivity, Environmental Tax Reform and sustainable growth in Europe • Economicimpacts: • economic growth • International trade & sectoral competitiveness What are the global impacts of a European environmental tax reform? • Environmental impacts: • Material extraction • Energy-related CO2 emissions http://www.petre.org.uk/

  5. Content • Background: The PETRE project • The GINFORS Model • Results • Policy recommendations

  6. 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)

  7. Data sources and coverage

  8. Country coverage country models OPEC ex. Indonesia ROW

  9. 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)

  10. 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

  11. Content • Background: The PETRE project • The GINFORS Model • Results • Policy recommendations

  12. GDP continues to grow in all 4 regions in the baseline scenario GDP development in the baseline scenario (average annual growth rates)

  13. Global economic weight will shift away from the old industrialised countries Shares in world GDP, baseline scenario

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

  15. Exports continue to grow in the baseline scenario Export developments in different world regions, baseline scenario

  16. Export impacts are stronger with global cooperation Export impacts in different world regions, three scenarios

  17. Resource-intensive sectors loose out EU Exports: impacts of scenario SH3

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

  19. Material extraction continues to grow Global used material extraction, 3 scenarios

  20. A European ETR and global cooperation can decrease material extraction

  21. CO2 emissions remain constant in the EU but increase elsewhere Energy-related CO2 emissions in 4 regions, baseline (bn tonnes)

  22. Global CO2 emissions can hardly be reduced with EU measures alone

  23. CO2 emissions can be substantially reduced with global cooperation Impacts of an ETR on energy-related CO2 emissions in HS1 and HS3

  24. Content • Background: The PETRE project • The GINFORS Model • Results • Policy recommendations

  25. 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

  26. 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

  27. 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

  28. 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

  29. Thank you! www.seri.at www.gws-os.de www.materialflows.net christine.polzin@seri.at lutz@gws-os.de stefan.giljum@seri.at

  30. 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.)

  31. 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)

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