dividends from energy and environmental taxes
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Dividends from energy and environmental taxes. Giorgio Brosio Department of Economics and Statistics University of Torino. Contents. Energy use and income levels. Environment consumption and income levels (Kuznets's curve). - PowerPoint PPT PresentationTRANSCRIPT
Dividends from energy and environmental taxes
Giorgio Brosio
Department of Economics and Statistics University of Torino
Energy use and income levels.
Environment consumption and income levels (Kuznets's curve).
Contents
Opportunities and needs for better (fiscal) use of energy to promote substainable growth.
How to combine energy
and environmental gains through taxation:
suggested tax options.
Medium income countries include many important producers of oil, gas and minerals.
Need for producing countries to keep consumption down (at levels not distant from those of non-producing countries).
All countries, however, face a common problem: preserve environment, save energy and/or use it fiscally to reduce distortions or to create opportunities.
Energy and income level
Angola Argentina Ecuador Algeria Gabon Iran Peru Kazakhstan Brazil
South Africa Chile Libya Colombia Mexico Namibia Uruguay Venezuela Russian Federation
Main producers of natural resources among (54) upper-middle income countries
Specific problems with producing countries
1. Excessive use of energy for both :
consumption – through subsidization of fuels and electricity
and production: energy intensive sectors
and 2. Neglect of non
Natural Resources Revenue at all levels of government (next table on down stream taxes).
3. Make difficult to finance investment for productive and social investment.
4. Create fiscal dependency.
Comparative incidence (% of GDP) of down stream taxation of oil and gas
Argentina Bolivia Brasil UK Intern. Oil Price 2000 1,22 2,80 2,04 3,2 28,5 2001 1,27 2,43 2,19 24,4 2002 1,42 2,31 2,6 2,4 25 2003 1,32 1,73 2,98 28,8 2004 1,20 1,65 2,81 38,3 2005 1,12 2,45 2,83 54,5 2006 1,00 2,18 2,88 2,6 65,1 2007 0,91 2,31 2,52 72,4 2008 0,93 2,10 2,50 97,3 2009 1,01 1,47 2,15 61,7 2010 1,05 1,59 2,04 79,5
Energy use is still much lower than in high income countries, but it is catching up quickly.
Lower intensity is matched by increase of income.
• Distorted prices and/or insufficient taxation may favor continuation of present industry mix, impacting negatively on long-term growth prospects.
All middle income countries : energy, and and GDP levels
400
600
800
1000
1200
1400
1600
1800
Energy use per groups of countries: 1980-1994
Low & middle incomeUpper middle incomeWorld
1995
1997
1999
2001
2003
2005
2007
2009
700
900
1100
1300
1500
1700
1900
2100
Energy use per groups of countries: 1995-2010
Low & middle incomeUpper middle incomeWorld
Environment and income levels
Message fromKuznets’s curve can be misleading, if action is not taken.
Permanence of industry mix.Technology can reduce incentives to collective action.
Rich people can solve individually pollution problems.
Rapid urbanization and industrialization have created some of the world’s largest mega-cities, with challenges for livability.
Environment and income levels
Climate change and energy security: challenge and opportunities for middle income countries
All countries need much new investment to adopt innovative technologies to help mitigate and adapt to the adverse consequences of climate change.
All government levels have to be involved.
Particurarly in mega-cities.
Implementation of enviromental policies is mostly local and costly.
Double Dividend: benefits
Introduction of energy/ environmental taxes provides two benefits:
fixes the pollution problem by reducing energy use and/or the use of most polluting enery sources.
revenue would allow the government to reduce distortionnary taxes,such as wage taxes, which would raise the net wage, and hence raise labour supply.
most low-medium income countries have a large informal sector. Cuts in taxes on wages contribute to shift to formal sector. Hence enhancing the overall rate of growth of the economy.
Double Dividend: caveats
Revenue from pure environmental taxes can be low, particularly if they reach the environmental targets.
Also enviromental taxes could also be distortionnary (not in the desired sense) if not properly designed.
Options for energy taxes
Better to bet on a multipackage/multitaxes option based on:
A wide-based energy/environmental tax.
A very few environmental targeted specific taxes.
Wide-based energy/environmental taxes: options
1. Pure excises on select fuels and energy sources. traditional solution applied in (almost) all countries.
environmental concerns are not to be the primary goal of excises, but rather revenue.
modulation of excises according to socio-economic considerations: diesel less taxed than gasoline.
price effect is non marginal, [[ahmad and stern (2010) ] a sufficiently large excise on petroleum products could go a long way towards constraining demand, as well as more ecologically friendly industrial restructuring.
Wide-based energy/environmental taxes:options
2. Environmentally re-modulated excises.
Goods with more environmental damage in production or consumption are taxed more heavily according to their environmental impact, such as carbon dioxide emissions,
Goods that cause relatively less environmental damage may be taxed less heavily than their substitutes.
Are an improvement against pure excises with a negligible increase in the administration and compliance cost.
Ideally, as in the next option, tax rates should be set to match the social costs of the energy source used.
Example of weights for re-modulationPure
exciseRe-
modulated excise
IEPS Modulation factors:
Amount (pounds) of CO2 emitted per unit of energy output or
heat content.
Pesos Pesos
Gasoline, per liter 1 1.34 157.2Liquid Gas, per kg 1 1.15 135
Diesel, per liter 1 1.38 161.3Heavy oil per liter 1 1.92 225Coke oil, per liter 0.1 0.14 161.3Natural gas, per
MMBtu4 4.00 117
Coal, per ton 100 183.76 215
Wide-based energy/environmental taxes:options
3. Pure measured emission taxes.
Involve payments which are directly related to metered or measured quantities of polluting effluent. General examples include carbon taxes.
Specific examples of measured emissions taxes include Sweden's tax on Nitrogen Oxides.
In all these cases, emissions sources are charged an amount based on measured total emissions from each particular source.
Are more costly to implement, may be subject to uncertainty about technological impact.
Deciles of households
In percentage of income of
households
Pesos per individual
1 9.7 1,015 2 7.2 1,397 3 6.4 1,7214 5.7 1,964 5 5.7 2,4646 4.9 2,6097 5.0 3,3438 4.6 4,0199 4.3 5,316 10 2.9 9,022Total 4.3 3,287
Distributional concerns
Mexico: Distributional impact Incidence of energy subsidies. 2010
Wide-based energy/environmental taxes: intergovernmental options
All the preceeding options are compatible with subnational surcharges.
Provided that consumption (not production) can be measured to avoid exportation of tax.
Subnational surcharges can provide ample revenue for financing environmental and other policies.
Environmental targeted specific taxes
Congestion tolls.
Water pollution charges.
Specific polluting emissions targets.
Noise emissions taxes.