Transcript Carbon Taxes, Ryan Dashx

Ryan Dash
June 3, 2016
Introduction
 Climate change is a global market failure
 Carbon taxes are a kind of Pigouvian tax
 Can inspire environmental innovation
 Does not require knowledge of individual firms’
abatement curves
Advantages over cap-and-trade
 Predictable energy prices
 Simpler, more transparent, quicker, cheaper, and
easier to implement
 Predictable revenue stream
 Avoids problems that have plagued ETSs
Best-Practice Design Fundamentals
 Tax fossil fuels in proportion to their carbon content
 Low initial rate followed by a rapid, known rate
increase
 Concurrent elimination of fossil fuel subsidies
 Revenue-neutral, with a focus on equity towards low-
income households
Case Study: Finland
 Enacted in 1990, the first country to have any carbon
tax legislation
 Originally €1.20/ton ($1.46) now €20.00/ton ($22.33)
 Exemptions: peat, natural gas, wood industry, and
energy-intensive firms
 Annual revenue ($750 million) go to general fund, cuts
in income taxes
Case Study: Finland
 Reduction in CO2 consumption from 53.2 million
metric tons in 1990 to 49.5 in 1992.
 Emissions after this went alternately up and down, and
are now at 46.8 (2012)
Case Study: Sweden
 Enacted in 1991
 Taxes fuels based on carbon content at $104.83/ton
 Exemptions: fuel for electricity, fuel for nautical, rail,
and air transportation. Manufacturing, mining pay
50%
 $3.7 billion annual revenue toward government budget
Case Study: Sweden
 Emissions initially rose from 56.5 million tons in 1991.
They fell again in the late 2000’s and are now 51.1 (2012)
 Government estimates that the tax cut emissions by
20% compared to regulations-only BAU
Effect of Environmental Tax
Reforms
Source: Anderson (2010)
Case Study: Norway
 Started in 1991
 $15.93 to $61.76 per ton, depending on industry
 Exemptions include air transport and various
industries
 Annual revenue of $1.3 billion, to government budget
Case Study: Norway
 Emissions have mostly risen since the introduction of
the tax, from 32.4 million metric tons in 1991 to 41.1 in
2016
 Norwegian government estimated 2.5% to 11%
reduction compared to BAU
 Independent assessment only 1.5% to 2.3% (Bruvoll
and Larsen 2004)
Case Study: British Columbia
 Priced at $10/ton in 2008, increased to $30/ton by 2012
 Per capita emissions were an average of 12.9% less
compared to 3.7% for the rest of Canada after the tax
 $292 million annual revenue; completely revenue-
neutral
 Emissions rose again in 2012 due to economic growth
Case Study: Ireland
 Began in 2010
 Initially €15 per ton ($16.70/ton) and rose to €20/ton
($22.30/ton)
 Revenues of €400 million ($446 million)
 Supplemented by other environmental taxes
 Some revenue given to farmers who rely on diesel, and
to reduce income taxes
Case Study: Ireland
 National carbon emissions down from 39.6 million
metric tons in 2010 to 35.5 in 2012, a 9% reduction
 A switch to more fuel efficient cars
 Wind energy production grew
Case Study: Australia
 Began in 2012
 Set at $19.60/ton
 Raised $3.8 billion in 6 months
 Estimated to have cut 5-9 million tons per year, or 3%
to 6%
 Repealed in 2014 by the new conservative government
Conclusions
 Limitations: lack of case studies and very little empirical
research
 Carbon taxes have generally been less effective than they
could be due to poor design: exemptions and low rates
 Nevertheless, they have brought carbon reductions and
government revenue
 Economic factors generally outweigh the effect of a carbon
tax
Important References
 EIA emissions data
 Carbon Tax Center
 Anderson, M. 2010. Europe’s experience with carbon-
energy taxation. Sapiens 3.2: 3.
 National Renewable Energy Laboratory. 2009. Carbon
Taxes: A Review of Experience and Policy Design
Considerations. Technical Report
Thank You