When taxes are introduced on carbon and energy, and the revenue is used to reduce other taxes, will a positive effect be achieved both for the environment and for the economy? In 1990 Finland was the first country to introduce a tax on CO2. Later, Sweden, Denmark, Netherlands, Slovenia, Germany and the UK followed suit with tax reforms that shifted taxation from labour to carbon and energy. Over the years, CO[{2} and energy taxes have gradually been raised, so that in Europe taxes of more than 25 billion Euros a year have been shifted. This book examines carbon-energy taxation in detail and looks at tax shifting programmes for lowering other taxes. It offers extensive analysis on the basis of historical data and seeks to answer important questions for policy-making, such as: What was the impact of tax shifting for economic performance and competitiveness? By how much were emissions of CO[{2} reduced? Could energy-intensive industries cut further down on their fuel demand or did they loose market shares? To what extent was there "leakage" from Europe, so that production and CO[{2} emissions were shifted to other countries or regions without CO[{2} -abatement policy? The use of unique and original data, including sector-specific energy prices and taxes, as well as the use of advanced statistical techniques, such as co-integration analysis and panel-regression techniques along with the time-series estimated macro-economic model E3ME, make this a truly comprehensive volume. On the basis of the lessons learned in Europe, this volume indicates how carbon-energy taxation could usefully be combined with emissions trading, and discusses implications for future international climate policy, including how the IPCC recommendations for a gradual escalation in carbon price could be accomplished while preventing carbon leakage.
Author(s): Mikael Skou Andersen, Paul Ekins
Year: 2010
Language: English
Pages: 256
Contents......Page 10
List of Figures......Page 14
List of Tables......Page 17
Abbreviations......Page 21
Notes on Contributors......Page 24
Part I. Pricing of Carbon in Europe......Page 30
1.1. Introduction......Page 32
1.2. The Porter hypothesis on the relationship between environmental regulation and competitiveness......Page 34
1.3. The double dividend debate......Page 36
1.4. What kind of efficiency are we talking about?......Page 39
1.5. Conventional indicators of competitiveness......Page 40
1.6. The need to account for technology and innovation......Page 43
1.7. Coverage of the book......Page 45
2.1. Introduction......Page 53
2.2. Denmark......Page 56
2.3. Finland......Page 61
2.4. Germany......Page 64
2.5. The Netherlands......Page 68
2.6. Slovenia......Page 70
2.7. Sweden......Page 71
2.8. UK......Page 75
2.9. Conclusions......Page 77
Part II. Industry-Sector Competitiveness......Page 82
3.1. Introduction......Page 84
3.2. Context......Page 85
3.3. Literature review and price-setting model......Page 88
3.4. Data......Page 91
3.6. Discussion of results by sector......Page 92
3.7. Implications......Page 99
3.8. Summary and conclusions......Page 103
4.1. Introduction......Page 106
4.2. Theoretical assessment of competitiveness indicators......Page 108
4.3. Empirical assessment of competitiveness trends......Page 118
4.4. Conclusions......Page 125
5.1. Introduction......Page 129
5.2. Modelling the Porter effects associated with energy taxes......Page 131
5.3. Data and method......Page 133
5.4. The relation between energy taxes, competitiveness, and output......Page 137
5.5. Interpretation of results......Page 142
5.6. Conclusions......Page 146
6.1. Introduction......Page 149
6.2. Ex-ante mitigation: tax-base modifications and reductions in tax rates......Page 150
6.3. Ex-post compensation: revenue recycling approach......Page 158
6.4. Winners and losers in ETR......Page 159
6.5. Conclusions......Page 169
Part III. Country Competitiveness and Carbon Leakage......Page 174
7.1. Introduction......Page 176
7.2. Modelling the EU Energy-Environment-Economy System with E3ME......Page 180
7.3. Processing the COMETR tax data......Page 196
7.4. Scenarios specified to model ETR......Page 206
7.5. Estimation of competitiveness effects......Page 208
7.6. The effects of selected ETRs, using E3ME, 1995–2012......Page 209
8.1. Introduction......Page 244
8.2. The literature on carbon leakage......Page 245
8.3. Modelling carbon leakage......Page 251
8.4. Description of ETR policies and carbon leakage scenarios......Page 256
8.5. Results......Page 259
8.6. Conclusions......Page 265
Part IV. Implications for Future Climate Policy......Page 268
9.1. Introduction......Page 270
9.2. Emissions trading......Page 271
9.3. Competitiveness implications of emissions trading......Page 272
9.4. Carbon taxes and emissions trading......Page 277
9.5. The interactions between taxes and trading......Page 278
9.6. Carbon taxes and emissions trading in the EU......Page 280
10.1. Introduction......Page 285
10.2. Avoiding dangerous climate change......Page 286
10.3. Greenhouse gas reductions: the role of carbon-energy taxation and emissions trading......Page 291
10.4. The economic dimension of the competitiveness debate: market shares and unit energy costs......Page 294
10.5. The environmental dimension of the competitiveness debate: carbon leakage......Page 301
10.6. Coping with the dual challenge of GHG stabilization and international competitiveness......Page 303
Annex......Page 311
C......Page 333
D......Page 334
E......Page 335
F......Page 336
I......Page 337
M......Page 338
P......Page 339
S......Page 340
T......Page 341
Z......Page 342
