Plenary 4 Professor Janet Milne - University of Technology ... · PDF fileSurprise challenger on environmental tax front Bulgaria over 10% of tax take. Denmark drops to 7th ... Modifications

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

©ACCA


Life in the fast lane – EU

General EU green tax landscape

Emissions trading scheme changes

Examples of tax innovation

4

5

0

2,000

4,000

6,000

8,000

1800 1850 1900 1950 2000

Millio

n t

on

ne

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

http://cdiac.ornl.gov/trends/emis/meth_reg.html

http://dx.doi.org/10.5194/essdd-7-521-2014

http://www.globalcarbonproject.org/carbonbudget/

©ACCA


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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©ACCA


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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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©ACCA


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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©ACCA


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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©ACCA


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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Lines of text go here





The Reality on the Ground

07957 303 892

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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%


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07957 303 892

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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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©ACCA


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.

-

Carbon leakage – as currently, beyond 2020 all major industrial sectors will be considered at risk

of carbon leakage.

-

Indirect carbon costs – Member States are encouraged to use auction revenue to provide

compensation in line with state aid rules

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©ACCA


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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©ACCA


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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©ACCA


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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©ACCA


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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©ACCA


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





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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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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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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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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



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



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

R

US

A

=>

AR

G

=>

BR

A

=>

CH

N

=>

IN

D

=>

ID

N

=>

RU

S

=>

ZA

F

0

40

80

120

160

200


Tax rate (EUR per tonne CO2)

Size of bubbles represents each fuel’s share in total emissions from energy use

CH

E

0

40

80

120

160

200


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

[email protected]

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Further information

mailto:[email protected]




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Plenary 4 Professor Janet Milne - University of Technology ... · PDF fileSurprise challenger on environmental tax front Bulgaria over 10% of tax take. Denmark drops to 7th ... Modifications