Plenary 4 Professor Janet Milne - University of Technology ... · PDF fileSurprise challenger...
Transcript of Plenary 4 Professor Janet Milne - University of Technology ... · PDF fileSurprise challenger...
Plenary 4
Professor Janet Milne
Green Tax Conference
Sydney 25th
September 2015
©ACCA 28/10/2015 Budget Breakfast - 19 March 2015 3
Environmental Taxes – Destination Europe
Chas Roy-
Chowdhury
Head of
Taxation, ACCA
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Life in the fast lane – EU
General EU green tax landscape
Emissions trading scheme changes
Examples of tax innovation
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0
2,000
4,000
6,000
8,000
1800 1850 1900 1950 2000
Millio
n t
on
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s o
f C
O2
North America
Western Europe (includes West and East Germany)
Centrally Planned Europe
Africa
Developing America
Centrally Planned Asia (including China)
Middle East
Far East (Including India)
Oceania
CO2 emissions by region, 1800-2007
(fossil-fuel burning and cement)
Source: Boden, T.A., G. Marland, and R.J. Andres (2010): ‘Global, Regional, and National Fossil-
Fuel CO2 Emissions’ CDIAC, US Department of Energy
Top Fossil Fuel Emitters (Absolute)
The top four emitters in 2013 covered 58% of global emissions
China (28%), United States (14%), EU28 (10%), India (7%)
Bunkers fuel used for international transport is 3% of global emissions Statistical differences between the global estimates and sum of national totals is 3% of global emissions
Source: CDIAC; Le Quéré et al 2014; Global Carbon Budget 2014
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UK Government target is the reduction of carbon dioxide emissions by
26-32% by the year 2020, and by at least 60% by 2050, compared to
levels in 1990
The construction industry is responsible for as much as 40 per cent of
man-made carbon emissions
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There are three steps to making use of the Renewable Heat Incentive (RHI):
1: you install in your property renewable heat systems such as solar thermal panels, heat pumps or a biomass boiler
2: you measure how much heat your renewable energy systems produce
3: The Government will pay a fixed amount based on that output, the type of technology and the size of the system.
The Renewable Heat Incentive is similar to the Feed-in Tariffs, a similar scheme for electricity generation, with some important differences:
It will be paid for by the Treasury not by energy users.
There is no ‘National Grid for Heat’ and so importing and exporting heat is not relevant.
It will be introduced in phases, with residential schemes not eligible until Phase 2.
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Feed in tariffs went live in April 2010
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Feed-in tariffs - payments to anyone who owns a renewable electricity system, for the energy they generate. Businesses, households, and any property owner are eligible.
Feed-in tariffs can yield up to 41.3p/kW hr, plus an additional 3p/kWh when you export any surplus back to the grid. The exact amount depends on the type and size of the system used to generate renewable energy.
An additional benefit of feed-in tariffs are that they reduce costs on a properties electricity bill.
Feed-in tariffs are index-linked to RPI and can be paid for 20 years. Solar systems can qualify for 25 years Feed-in tariffs.
Over the life of the Feed-in tariffs they should cover the initial capital cost of installation and, according to the Government, earn a return up to 8% p.a. In practice that means you should earn back the capital cost at least two to three times over the duration of the tariffs.
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Breaking news the new normal - Solar Under the new plans, the smallest solar arrays with less than 4kW of capacity
would see generation tariffs on offer cut by 87 per cent from next January.
Across the board, new bandings are being proposed for different arrays along with
cuts of around 80 per cent.
Moreover, a new digression pathway for cutting tariffs each quarter is proposed
that would see FiT incentives end for new sub-10kW and 10,000kW-plus
installations by January 2019.
FiT – could be end of Solar as we know it in the UK.
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If Government adopt proposed FiT cuts package would reduce spending by
£450m in 2020/21 under its central scenario.
That translates into a reduction in average household electricity bills of just 0.9 per
cent or £6 a year
Potential saving for a large energy-intensive industrial consumer is inevitably
much larger at 1.4 per cent or £154,000.
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In addition to the proposal to end pre-accreditation for projects trying to access
the FiT
- a move designed to make it harder for businesses to justify investing in new
renewable energy technologies
- the government has also proposed not extending the scheme to any further
technologies, preventing extensions from existing installations from claiming
FiTs,
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It is a middle class subsidy hence withdrawal
But we need to start somewhere
To destroy the UK industry is just backward step
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The Reality on the Ground
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The UK has a declining trend
Many other EU countries the same
Scandinavia always seen as a leading light but
Denmark DK peaked below 5% of GDP in environmental taxes
Today at just 3.9%
The Reality on the Ground
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Surprise challenger on environmental tax front Bulgaria over 10% of tax take.
Denmark drops to 7th
France surprise last but socialist Government may change this
Realistically Southern European tax numbers not reliable.
Evasion 40% or more
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The European Approach
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Energy taxes are favourite
But no general trend
Cultural mind set and political expedience decides
Real zig zagging in implementation
The Specifics
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The Trend
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Quite a mix between EU states
Around 50% of member states have reduced their tax take from environmental taxes
Most interesting is that the net amount of take has also been reduced
Reduced for EU25, EU27, and EA 15
The Trend
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Emissions Trading Scheme
Phase III (2013–20), the European Commission has proposed a number of
changes, including
•the setting of an overall EU cap, with allowances then allocated to EU members
•tighter limits on the use of offsets
•limiting banking (stock piling) of allowances between Phases II and III
•move from allowances to auctioning.
Using a market based mechanism may have been a bad move as it has devalued
the ETS impact if any
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Modifications to the scheme for phase 4 – 2021-2028
Announcement 15th July 2015
Intense business pressure from high volume energy users
The EU is concerned with carbon leakage and competitiveness
Changes will be agreed in Paris summit end 2015
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Modifications to the scheme for phase 4 – 2021-2028 Changes:
Benchmark values will be updated to capture technological progress in the different sectors. Current values are determined based on data from 2007-2008 and would not reflect the state of technology after 2020.
Production data - the system will be more flexible by better taking into account production increases or decreases and adjusting the amount of free allocation accordingly. A specific number of free allowances will be set aside for new and growing installations.
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Carbon leakage – as currently, beyond 2020 all major industrial sectors will be considered at risk
of carbon leakage.
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Indirect carbon costs – Member States are encouraged to use auction revenue to provide
compensation in line with state aid rules
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The overall quantity of allowances will decline by 2.2% every year starting from
2021 as planned.
Suspicion is that the new flexibility will effectively counter the 2.2% decline
Strong political interest in reducing the overall ETS impact and integrity
The world needs to join up and join in before the ETS is killed off
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Car innovation – EC direct help EU-funded project has developed innovative components, chemical technologies and manufacturing processes for cheaper, more-dependable and greener Lithium-ion batteries.
Boost competitiveness among European battery and electric vehicle manufacturers.
The manufacturing process is also 15% cheaper
• more environmentally friendly battery materials that reduce chemical use;
• innovative processes (the use of aqueous slurries for electrode manufacturing) – to reduce electrode production costs and environmental pollution;
• new assembly procedures (including the use of laser cutting and high temperature pre-treatment) – to reduce the time and cost of cell fabrication;
• an automated module and battery pack assembly line for increased production output and reduced cost;
• lighter battery modules designed for easy assembly and disassembly for recycling battery components;
• waste reduction – the modular design and use of new materials allows recyclers to safely recover active and inactive battery materials.
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Unlocking new recharging solutions for electric cars
The EU-funded FASTINCHARGE project is designing a more practical and efficient
means of recharging electric vehicles (EV). In doing so, the project aims to make
electric vehicles more appealing to consumers - helping car makers become more
competitive.
• FASTINCHARGE, due for completion in 2015 - both stationary recharging and the
possibility of recharging en route. Researchers have completed the design of the new
charging station,
• The new wireless station equipped to exchange charging data (user ID, supplier ID,
duration of charge and energy meter information) with the vehicle, and provide
communication and guidance throughout the charging process.
• project team is running series of tests of the panels in the northern French from October
2014 until October 2015. The researchers will assess the efficiency and viability of
wireless charging, the benefits to EV users and the impact on the electric grid
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Concluding comment
Much happening but real concerns
EU seems to be drawing back from emissions trading rules
Governments accepting massive carbon reduction targets but
little likelihood to achieve them
UK and other states reducing momentum to move towards
renewables
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Conclusion
EU are leading Environmental Taxes but the rest of the world
is threatening that commitment
Paris 2015 will be a “huge success” but will it really.
Will the US legislate, China, India – Australia.
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Peter Cosier Director & Founding Member, Wentworth Group of
Concerned Scientists
A Proposal for Green Fiscal Reform: Protection of Natural and
Cultural Resources for a Sustainable Future
Case Study - Mardoowarra Geopark
( Cultural and GeoHeritage Values )
16th Global Conference on Environmental Taxation
2015
Dr Anne Poelina
Peter Cullen Fellow Nyikina Traditional Custodian
Mardoowarra (Fitzroy River)
• Flood Plain - Australia
Flood Plain - Fitzroy River
We must ask the Question: Can we have a Shared and Common
Future under Climate Change?
What is a Geopark?
A Geopark is an area of outstanding geological
heritage. Geoparks are territories large enough so
development strategy can be emplaced and
embrace all other facets of natural, cultural,
historical and archaeological heritage.
A Geopark is not a formal, legislative designation;
therefore, it carries no legal obligations or
restrictions.
Mardoowarra Geopark would aim to:
• be a case study (27,000 sq km) as an alternative
science -cultural - conservation economy
• incorporate Indigenous science as a means to protect
geological heritage and cultural heritage within
local, national and international frameworks
• incorporate Indigenous science as a means to protect
geological heritage and cultural heritage within
local, national and international frameworks
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Mardoowarra Geopark would aim to:
• support sustainable economic growth through
geotourism and small business development
• support sustainable economic growth through
geotourism and small business development
• support sustainable economic growth through
geotourism and small business development
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Mardoowarra (Fitzroy River) near Looma
What Do We Need?
• Value and protect the Mardoowarra (Fitzroy River) as
a Registered Sacred Site (WA Aboriginal Heritage Act)
• Value the Mardoowarra (Fitzroy River) National
Heritage Listing in 2011 for its natural and cultural
values
• Recognition of the Mardoowarra (Fitzroy River)
Geopark as a Cultural and Natural Resource Case
Study for Green Fiscal Reform
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What Do We Need?
• Research Investment Funds ($60 000) to undertake a
scoping study to investigate and develop a more
comprehensive investigation in 2016 to map and value
the multiple tangible and intangible assets of the
Mardoowarra (Fitzroy River)
• Secure investment for a collaborative international
transdisciplinary research team to work in partnership
with Indigenous traditional owners and custodians of
the Mardoowarra to build a body of knowledge for
sustainable living and diverse “green” economies.
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www.majala.com.au
STEPS TOWARDS SETTING PIGOUVIAN TAX RATES
Presentation at the 16th Global Conference on Environmental Taxation, Sydney, 25.09.15 Nils Axel Braathen, OECD Environment Directorate
Textbooks in environmental economics suggest internalising
environmental externalities through “Pigouvian” tax rates –
i.e. using tax rates that reflect the marginal external costs to
society.
In practical policy making, this is easier said than done – e.g.
due to a lack of knowledge about the magnitude of these
marginal social costs.
There will always be “gaps” to fill in this regard, but OECD
[and others!] is currently doing several pieces of work that
should allow some further steps to be taken.
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Introduction
This 2014 book combined estimates of mortalities caused by outdoor air pollution from the 2010 GBD study with VSL figures based on an OECD meta-analysis of VSL estimates.
Outdoor air pollution cost OECD countries alone almost USD 1.6 trillion in 2010; China USD 1.3 trillion and India USD 0.5 trillion.
Somewhat lower 2013 GDB mortality estimates have just been published, but the cost in OECD countries nevertheless were USD 1.5 trillion.
VSL in China has been increased 15%.
A very recent study by KCL indicates that NO2 cause more mortalities (in London, UK) than what PM2.5 does.
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The Cost of Air Pollution
For setting Pigouvian tax rates it is necessary to know how
much each of the taxable goods or services contributes at the
margin to the total air pollution costs.
This requires information about how much of the pollution is
caused per litre of transport fuels; per tonne of different fuels
used per kWh of electricity generated; etc.
The book estimated that on average in OECD countries, road
transport caused approximately 50% of the air pollution.
Estimates for individual countries are lacking, as earlier
indications on the shares of different pollution sources in total
emissions have not been updated.
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The Cost of Air Pollution
The Cost of Air Pollution added 10% to reflect social costs of
morbidity impacts of outdoor air pollution.
An upcoming OECD ENV WKP will provide a more in-depth
discussion of morbidity costs of outdoor air pollution, but
confirms the order of magnitude we used.
The greatest impacts are from increased mortality in adults
due to long-term exposure to outdoor PM, but PM and
ozone also cause a wide range of less serious health
outcomes.
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Social costs of morbidity impacts of
outdoor air pollution I
Suggested the following pollutant and health end-pointes combinations:
Chronic bronchitis; PM
Hospital admissions (Respiratory & Cardiovascular); PM and ozone
Work-loss days; PM and ozone
Restricted activity days; PM and ozone
Acute lower respiratory infections in children aged less than 5 years;
PM
Acute bronchitis in children older than 6 years; PM
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Social costs of morbidity impacts of
outdoor air pollution II
The unit values include three components:
Resource costs (avertive expenditures and mitigating
expenditures),
Opportunity costs (costs related to loss of productivity
and/or leisure time) as well as
Disutility costs (pain, suffering, discomfort and anxiety).
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Social costs of morbidity impacts of
outdoor air pollution III
Health end-point
Central unit
value
Range (lower –
higher)
Cases of chronic bronchitis 334 750 41 700 – 89 800
Hospital admission cases 2 000 600 – 3 300
Work loss days Country-specific Country-specific
Restricted activity days (RAD)
& Minor restricted activity days
(MRAD)
RAD: 170
MRAD: 62
RAD: 41 – 268
MRAD: 53 – 70
Acute lower respiratory infections in
children aged < 5 years 464 301– 511
Acute bronchitis in children 464 301– 511
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Social costs of morbidity impacts of
outdoor air pollution IV
Many projects and public policies in various sectors can have
large impacts on GHG emissions.
It is thus important how countries take these impacts into
account in their assessments, ex ante and ex post.
This is of direct relevance for any attempts to set Pigouvian tax
rates in relation to energy use and transport.
An upcoming OECD ENV WKP will discuss approaches which
can be used to value changes in GHG emissions in policy and
project appraisals and present a survey of current practice in
OECD countries.
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Monetary carbon values in policy appraisal
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Summary of questionnaire responses
Transport
investments
Energy
investments
New policy
assessments
Ex post
assessments
Absolute % / Obs Absolute % / Obs Absolute % / Obs Absolute % / Obs
Are there clear criteria for
how to include GHG
emission changes in CBAs?
Yes 12 63% 6 40% 4 24% 2 13%
No 7 37% 9 60% 13 76% 13 87%
What is the share of cases
where impacts on GHG
emissions have been part of
the CBAs?
All 1 6% 1 7% 1 7% 0 0%
Most 7 41% 3 21% 2 14% 2 20%
Some 2 12% 4 29% 1 7% 0 0%
A few 3 18% 1 7% 3 21% 1 10%
Not
known 2 12% 2 14% 5 36% 3 30%
None 2 12% 3 21% 2 14% 4 40%
What is the unweighted
average of the monetary
carbon values that have
been reported -- in USD in
2014 money value?
2014 57 13 38 9 56 7 53 4
2020 66 11 47 8 82 5 68 3
2030 99 13 67 8 115 5 104 3
2050 164 11 153 6 237 5 248 3
2100 349 2 467 1 467 1 467 1
In 2006, OECD published Cost-Benefit Analyses and the
Environment: Recent Developments.
The book has been one of the “best-sellers” of OECD ENV –
but much relevant work has been done since then.
It has therefore been decided to update the book.
Preparing for that, one upcoming OECD ENV WKP will provide
a general overview of work by non-OECD authors in this area,
… while another one will provide a similar review, but focusing
on new contributions that address how to include impacts on
biodiversity and ecosystem services in CBAs.
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Cost-benefit analyses and the environment
Taxing Energy Use: A Graphical
Analysis (2013)
Systematically described taxes
on all energy use in OECD
countries
Analysed tax patterns for different
fuels & users
Taxing Energy Use 2015: OECD
and Selected Partner Economies
Cross-country analysis for 41
countries
Detailed country chapters for
Argentina, Brazil, China, India,
Indonesia, Russia & South Africa
Country chapters & graphical
profiles of energy use & taxation 59
Taxing Energy Use
World energy use
0% 20% 40% 60% 80% 100%
0 100 200 300 400
% of world energy use
Total energy use (EJs)
OECD
USA JPN
DE
U
CA
N
FR
A
KO
R
Re
st o
f O
EC
D
Rest of world
0% 20% 40% 60% 80% 100%
0 100 200 300 400
% of world energy use
Total energy use (EJs)
OECD SPE
Rest of world USA JPN
DE
U
CA
N
FR
A
KO
R
Re
st o
f O
EC
D
CHN IND RUS
BR
A
IDN
Z
AF
A
RG
0% 20% 40% 60% 80% 100%
0 100 200 300 400
% of world energy use
Total energy use (EJs)
World energy use
Source | Taxing Energy Use 2015: OECD & Selected Partner Economies (OECD, 2015)
GB
R
0
40
80
120
160
200
Oil products Coal Natural gas Combustibles, biofuels & waste Economy-wide
Tax rate (EUR per tonne CO2)
Size of bubbles represents each fuel’s share in total emissions from energy use
AU
S
CH
L
DN
K
FR
A
DE
U
ITA
JP
N
KO
R
ME
X
NL
D
SW
E
CH
E
GB
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US
A
=>
AR
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BR
A
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CH
N
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IN
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ID
N
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RU
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ZA
F
0
40
80
120
160
200
Oil products Coal Natural gas Combustibles, biofuels & waste Economy-wide
Tax rate (EUR per tonne CO2)
Size of bubbles represents each fuel’s share in total emissions from energy use
CH
E
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40
80
120
160
200
Oil products Coal Natural gas Combustibles, biofuels & waste Economy-wide
Size of bubbles represents each fuel’s share in total emissions from energy use Tax rate (EUR per tonne CO2)
Effective tax rates on CO₂ from different energy sources
www.oecd.org/env/policies/database
www.oecd.org/env/tools-evaluation/
www.oecd.org/greengrowth/greening-
transport/transport-and-environment.htm
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Further information