Transcript Dias nummer 1

Climate Policy and Green Tax
Reform in Denmark
Some conclusions from the 2009
report to the Danish Council of
Environmental Economics
Presentation to the BCCD-BIU
on March 9, 2009
by Professor Peter Birch Sørensen
Chair of the Environmental Economic Council
Agenda
• Danish energy and climate policy goals
• Prospects for energy use and greenhouse
gas emissions in Denmark
• Alternative strategies for reduction of
greenhouse gas emissions and the role of
green taxes
Background
GHG regulation at EU and national levels
• EU level: European CO2 Trading Scheme (ETS)
– Tradable CO2 quotas for firms in ETS sector,
encompassing energy producers and large energy
intensive firms
• National GHG targets in non-ETS sectors
– Emission in ETS sector determined at EU level, so
– National GHG policy should focus on non-ETS sector
• Not possible to shift CO2-reduction from ETS
sector to non-ETS sector
Danish policy goals
1. Reduction of gross energy consumption by 4
percent by 2020 (compared to 2005)
2. Sustainable energy sources (wind, biomass
etc.) should provide for 30 percent of total final
energy consumption by 2020
3. 20 percent reduction of greenhouse gas
emissions from non-ETS sector by 2020
(compared to 2005)
A forecast for Danish energy
consumption and GHG emissions
Tools of analysis:
• A macroeconomic model
coupled with
• A model of energy demand from businesses and
households
coupled with
• A detailed model of energy supply from the
energy-producing sectors
The forecasted
business-as-usual scenario
1. Reduction of gross energy consumption by 6½ percent by 2020
– Policy goal achieved primarily through improved efficiency in energy
production
2. Sustainable energy provides more than 40 percent of total final
energy consumption in 2020
– Policy goal achieved mainly through market adjustment to changing
relative prices of the various sources of energy
3. Reduction of GHG emissions from non-ETS sector by 4 percent by
2020
– Substantial rise in GHG emissions from transport sector
– Need for further reduction of GHG emissions of 6 million tons of CO2equivalents (in part through purchase of GHG emission rights abroad)
Achievement of policy goal requires new policy initiatives
GHG emission in non-ETS sector
Our forecast compared with GHG target for 2020
Mio. ton
42
40
38
36
34
32
30
1990
1995
2000
2005
2010
2015
2020
Achieving the climate policy
goal through green taxes
Issues for Danish climate policy
• How high are the costs of reducing GHG
emissions from the non-ETS sector?
– Who must reduce emissions?
– How are the various industries and household
groups affected?
• What are the consequences of higher
green taxes?
– Income distribution
– Production structure in industries and services
GHG emission in non-ETS sector
Other industries
Induvidual heating in
households
Transport,
households
Agriculture
Transport, industries
The case for
a tax on GHG emissions
• Cost-effectiveness: a GHG tax ensures a
uniform cost of GHG emissions across all
firms and households. The market will
then find the cheapest ways of reducing
emissions
• Dynamic efficiency: a GHG tax provides
a permanent incentive to develop cleaner
technologies
A multisector model for the analysis
of green taxes (MUSE)
A model of the small open Danish economy including
• 130 production sectors using capital, labour, energy and
intermediates
• 11 household types (10 income deciles in the labour
force, one outside the labour force) consuming 71
different types of goods and services
• A tax system including taxes on income and
commodities plus ‘green’ taxes
• Environmental effects in the form of emissions of various
air pollutants, including GHGs
Reductions of non-ETS GHG emissions
induced by a uniform GHG tax
Households Businesses All non-ETS
Kr. pr. ton CO2 -ækvivalent
2000
Husholdninger
Erhverv
Total ikke-kvotesektor
1500
1000
500
0
0
5
10
Pct.
15
20
Reduction in GHG emissions
Reductions of household GHG
emissions induced by a uniform GHG tax
Transport Heating All non-ETS
Kr. pr. ton CO2 -ækvivalent
2000
Transport
Rumopvarmning
Total ikke-kvotesektor
1500
1000
500
0
0
5
10
Pct.
15
20
Reduction in GHG emissions
Reductions of non-ETS GHG emissions
induced by a uniform GHG tax
Agriculture Other business sectors All non-ETS
Kr. pr. ton CO2 -ækvivalent
2000
Landbrug
Øvrige erhverv
Total ikke-kvotesektor
1500
1000
500
0
0
5
10
Pct.
15
20
Reduction in GHG emissions
Marginal GHG reduction costs
Uniform tax on all non-ETS emitters
Exempting agricultural sector from GHG tax
Kr. pr. ton CO2 -ækvivalent
3000
Landbruget fritaget for afgift
Ensartet afgift
2500
2000
1500
1000
500
0
0
5
10
Pct.
15
20
Reduction of GHG emission
‘Required’ GHG tax in non-ETC sector
•
11 % reduction of GHG emission compared to 2005 corresponds to 4 mill.
tons reduction
•
2/3 of additional reduction needed to reach 2020 GHG target
•
400 DKK per tonnes CO2 when tax imposed on all emitters (including
agriculture)
– Approximately 1 DKK per litre gasoline
•
1.100 DKK per tonnes CO2 when the agricultural sector not included
– Approximately 3 DKK per litre gasoline
•
CO2–tax higher than the expected price of CO2 quotas (225 DKK per
tonnes in 2020)
Implications for Danish climate policy
• Achieving the GHG goal solely through
domestic emissions reductions will be very
expensive
• The marginal GHG reduction costs are
higher in the household than in the
business sector
• Exempting agriculture from emissions
reductions will be extremely expensive
The problem with agriculture
• Danish agricultural production is very GHG
intensive and highly exposed to
international competition
• The potential for international GHG
”leakage” is therefore particularly big in the
agricultural sector, especially if other EU
countries do not impose effective GHG
targets on their farming sectors
Potential solutions
• A tax on the GHG content of food products
consumed in Denmark is hard to administer and
helps very little to achieve the goal of domestic
emissions reductions
• A better way forward: a modest GHG tax on farm
animals combined with subsidies to GHGreducing measures (e.g. manure used to
produce biogas etc.) could equate the cost of
GHG emissions between the agricultural and the
non-agricultural sectors
Some further recommendations
• Marginal GHG reduction costs are much lower in
the ETS than in the non-ETS sector. Therefore:
shift energy demand and supply from the nonETS to the ETS sector (promote electric cars,
district heating, heating pumps etc.)
• Buy as many GHG emission rights abroad as
possible and work to liberalise EU rules on the
international trading of emission rights
International GHG regulation
EU-regulation of CO2-emission
Different regulation for ETS and non-ETS sectors
– Emission from ETS sector determined at European level
– Separate national GHG reduction targets in non-ETS sectors of EU
member states
The reduction targets for the non-ETS sector in the different
countries were determined by distributional considerations
– High income EU countries have to reduce by more
(Denmark in particular!)
– The marginal CO2-reduction costs in non-ETS sectors are very
across EU member states
CO2-reduction in EU
could be obtained at lower overall cost
Recommendations for
changes in EU-regulation
• First best:
Allow EU Member States to buy CO2-quotas in the European ETS
market as a way to meet national targets in non-ETS sector
– would ensure uniform marginal GHG reduction costs between ETS and
non-ETS sectors and between countries
– would thereby minimise the overall costs of GHG reduction in the EU
• Second best alternative:
Allow EU Member States to trade GHG emission rights for their nonETS sector as a way of meeting national goals for that sector
– would ensure uniform marginal GHG reduction costs across the nonETS sectors in the EU
– would not ensure uniform reduction cost between ETS and non-ETS
sector
Final comments on current
Danish policies and policy goals
The recent tax reform agreement
included, among other things:
• higher electricity taxes on firms and households
(no environmental effect)
• higher taxes on energy used for heating in firms
and households (very little environmental effect)
• A new energy tax on fuels used by businesses
for manufacturing purposes (very little
environmental effect)
Welfare cost of reducing GHG
emissions from the non-ETS sector
Use of energy taxes
Mia. kr.
35
30
Use of carbon tax
Energi
CO2
25
20
15
10
5
0
0
5
10
Pct.
15
20
Reduction of GHG emissions
The tax reform agreement from an
environmental economic viewpoint
• The ’green’ tax increases are extremely
poorly targeted from an environmental
point of view
• If the main purpose of a ’green’ tax is to
raise revenue, it should be levied only on
households to avoid impairing the
efficiency and international
competitiveness of the business sector
Official policy goals
1. Reduce total energy consumption
2. Reduce GHG emissions (and emission of other
pollutants)
3. Improve the security of energy supply
4. Increase the share of sustainable energy in
overall energy supply
But: Do goals no. 1 and 4 make sense if we have
already achieved goals no. 2 and 3?
Recommendations from the
Environmental Economic Council
• Pursue the climate policy goals and
environmental policy goals through targeted
emissions taxes rather than through general
energy taxes
• Pursue the goal of energy security through
targeted taxes on oil and natural gas rather than
through general energy taxes
• With the policies recommended above, there is
no need for separate targets for energy savings
and for the share of sustainable energy sources