Transcript Panel 18-PPS-Braathen

Taxation, Innovation and the Environment
Presentation of a new OECD publication at the
11th Global Conference on Environmental Taxation
Bangkok, Thailand
3-5 November 2010
Nils Axel Braathen
OECD, Environment Directorate
[email protected]
Jens Lundsgaard
OECD’s Centre for Tax Policy & Administration
[email protected]
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Introduction
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In October 2010, OECD published the book Taxation,
Innovation and the Environment …
…. to a large extent built on a number of ex post studies of
the innovation impacts of selected environmental policies …
… but also includes an updated overview of the use of
environmentally related taxes in OECD countries ...
… and a ‘user’s guide’ for policy makers on how to
implement such taxes.
This presentation will highlight some main points …
… and will be followed by some invited comments and
general discussion.
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Definition of environmentally related taxes
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OECD’s definition (in co-operation with the EU commission,
and IEA):
– Any tax levied on a tax-base of particular environmental importance.
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This includes taxes on energy, motor vehicles, measured or
estimated emissions to air and water, waste management,
noise, hazardous chemicals, natural resources, etc.
We do not take the name, or the stated purpose, of a tax
into account when judging whether it is “environmentally
related” or not.
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Revenues from environmentally related
taxes in per cent of GDP
6
2008
2000
1995
5
Per cent of GDP
4
3
2
1
0
-1
4
-2
Revenues from environmentally related
taxes in per cent of GDP, by tax-base
5%
Other
Motor vehicles
Energy
4%
Per cent of GDP
3%
2%
1%
0%
-1%
5
-2%
Revenues from environmentally related
taxes in per cent of total tax revenues
15
2008
2000
Per cent of total tax revenue
10
5
0
-5
6
-10
Revenues from environmentally related
taxes in per cent of GDP, by tax-base
0.50
2.5%
0.45
0.40
2.0%
0.30
1.5%
0.25
0.20
1.0%
0.15
Other
0.5%
0.10
Motor vehicles and transport
Energy products
0.05
Rotterdam spot price, unleaded petrol
7
0.0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
0.00
€ per litre
Per cent of GDP
0.35
Why have revenues decreased in per
cent of GDP in recent years?
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This is closely linked to the increase in world crude oil prices
since year 2000.
This price increase has contributed to people substituting
away from motor fuel use, towards other goods and services.
In short: Price signals work!
As motor fuels often are (much) more taxed than other goods
and services, revenues from environmentally related taxes
decrease in per cent of GDP.
The high motor fuel prices may also have made it politically
difficult for countries to increase nominal tax rates in line with
inflation.
Hence, for example, the real tax rate on petrol decreased 8%
between 2000 and 2010.
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€ per litre
0.6
0.6
0.4
0.4
0.2
0.2
0.0
0.0
-0.2
P - 1.1.2010
D - 1.1.2010
P - 1.1.2000
D - 1.1.2000
Estonia*
Slovenia
Spain
Hungary
Austria
Luxembourg
Czech Republic
Switzerland
Slovak Republic
Israel
Sweden
Ireland
Italy
Belgium
Denmark
Portugal
France
Greece
Norway
Finland
United Kingdom
Germany
Netherlands
Turkey
0.8
Mexico
United States -- Fed
Canada -- Fed
United States -- Fed + State
Canada -- Fed + Prov
New Zealand
Chile
Australia
Iceland
Poland
Japan
Korea
Tax rates on petrol and diesel
1.0
1.0
0.8
-0.2
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Tax rates on light fuel oil
0.45
0.40
High
Low
0.35
EUR per litre
0.30
0.25
0.20
0.15
0.10
0.05
0.00
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Taxes on NOx emissions to air
6.0
High
Low
EUR per kg NOx
5.0
4.0
3.0
2.0
1.0
0.0
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Tax rates on landfilling of waste
90
80
High
Low
70
EUR per tonne
60
50
40
30
20
10
0
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Findings from new OECD study:
Taxation, Innovation and the Environment
180
Swedish NOx tax
– Patents increased;
emission intensities
declined; Marginal
Abatement Costs fell
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Swiss VOC tax
Marginal Abatement Cost
Curves of Taxed Emitters
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SEK per kg NOx
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160
120
100
80
60
40
20
0
-20
0
100
200
300
400
500
600
700
800
Emission intensity in kg NOx per GWh
900
1991
1992
1994 solutions
1996
– Firms were quite innovative and found many
practical
beyond patenting
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UK Climate Change Levy
– Firms subject to 80% tax reduction innovated less
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Findings from new OECD study:
Taxation, Innovation and the Environment
6000
Tax rates
200
100
1999
1997
1995
1993
1985
1983
1981
1979
1977
1975
1973
1971
1991
0
Lead-in time for taxes provide incentives for abatement
and innovation before cost burden
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2005
2003
2001
1999
1997
1995
1993
1991
1989
Related patents
– Swedish NOx charge and Japanese SOx charge
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1987
1985
1983
1981
1979
1977
300
1989
Individual vs. collective
innovation incentives
400
1987
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0
1975
– Japanese SOx charges
were unpredictable,
weakening investment
in R&D and innovation
2000
1973
Predictability of rates
1971
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4000
A Guide to Environmentally Related
Taxation for Policy Makers
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This chapter of the book provides a broad overview to policy
makers about the considerations surrounding
environmentally related taxation.
Taxes are assessed against other potential policy
instruments before turning to fundamental tax design
considerations.
The chapter also addresses the political economy
considerations present during implementation.
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Competitiveness concerns
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By seeking to protect the environment, environmentally related taxation is
by definition intended to affect production decisions and have a
disproportionate impact on polluters.
The most effective method to minimise potential carbon leakage is to coordinate environmental policies across countries.
Another possibility is to provide some lead-in time for affected firms to
undertake mitigation measures.
Where revenues from environmentally related taxes are recycled to the
affected firms, the marginal abatement incentive is generally maintained.
However, the polluter pays principle is violated via such a mechanism –
the price to consumers of pollution-intensive products is not increased.
Rate reductions and exemptions shift some of the abatement burden to
others – or result in an inferior environmental outcome.
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Income distribution concerns
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Increased taxes on combustion-related emissions can have
significant impacts on low-income households.
Much the same is true of water use.
Governments should not ignore such impacts.
Policy makers should be concerned not necessarily with the
distributional impacts of specific policies and taxes, but with
the redistributive aspects of overall governmental policy.
Distributive impacts could be better addressed through
broader means, such as lowering personal income taxes,
supplementing low-income supports – rather than through
exemptions in environmentally related taxes.
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More information
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www.oecd.org/env/policies/database
www.oecd.org/env/taxes
www.oecd.org/env/taxes/innovation
www.oecd.org/greengrowth
[email protected]
[email protected]
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