WIOD Conference on IndustryLevel Analyses of Globalization and
WIOD Conference on Industry-Level Analyses of Globalization and its Consequences 26 May 2010 Global effects of a European environmental tax reform Christine Polzin (SERI) Dr Christian Lutz (GWS) Dr Stefan Giljum (SERI) www. seri. at
Content 1. Background: The PETRE project 2. The GINFORS Model 3. Results 4. Policy recommendations 2
Content 1. Background: The PETRE project 2. The GINFORS Model 3. Results 4. Policy recommendations 3
Resource Productivity, Environmental Tax Reform and sustainable growth in Europe What are the global impacts of a European environmental tax reform? • Environmental impacts: • Material extraction • Energy-related CO 2 emissions • Economic impacts: • economic growth • International trade & sectoral competitiveness http: //www. petre. org. uk/ 4
Content 1. Background: The PETRE project 2. The GINFORS Model 3. Results 4. Policy recommendations 5
Global INterindustry FORecasting IN FOR System (GINFORS) GINFORS: • • Economy-energy-environment simulation model Global multi-country approach Multi-sector approach Links modules for bilateral trade, macroeconomic behaviour, industrial output from IO tables and energy use and prices • Includes a global dataset on material extraction (physical data) 6
Data sources and coverage 7
Country coverage country models OPEC ex. Indonesia ROW 8
Baseline and policy scenarios Baseline = Business as usual scenario • Socio-economic and economic-environmental relations of the past will continue in the future ETR scenarios • ETR tax in all EU non-ETS sectors = ETS price • Aviation included in EU ETS • 100% auctioning of power generation ETS permits • 50% auctioning of all other ETS permits in 2013, 100% auctioning by 2020 • Material taxes (5% ad valorem in 2010, 15% by 2020) 9
Policy scenarios S 1 H • High energy prices • ETR with 100% revenue recycling: all revenues are used to reduce the employers’ social security contributions (income tax, etc) • 2020 EU GHG emissions target (20%) met S 3 H • • • High energy prices ETR with 100% revenue recycling International cooperation 2020 EU GHG target (30%) Emerging economies introduce a CO 2 tax which is recycled via income tax reductions 10
Content 1. Background: The PETRE project 2. The GINFORS Model 3. Results 4. Policy recommendations 11
GDP continues to grow in all 4 regions in the baseline scenario GDP development in the baseline scenario (average annual growth rates) Average annual growth rates 199520002005201020152020 In % (based on USD PPP, 2004) EU-27 3. 1 1. 9 2. 2 2. 5 2. 2 OECD (non-EU) 3. 8 2. 6 2. 0 3. 0 2. 9 Emerging Economies 6. 2 8. 0 8. 7 8. 3 6. 8 Ro. W 3. 8 4. 9 5. 1 3. 7 2. 9 World 4. 2 4. 8 4. 4 4. 9 4. 4 12
Global economic weight will shift away from the old industrialised countries Shares in world GDP, baseline scenario Shares in world GDP 2000 EU-27 25. 4 22. 4 20. 4 18. 4 16. 8 OECD (non-EU) 41. 3 37. 5 33. 8 31. 2 29. 3 Emerging Economies 27. 9 31. 4 37. 0 42. 0 46. 0 5. 9 9. 2 9. 5 9. 0 8. 5 Ro. W 2005 2010 2015 2020 In % (based on USD PPP, 2004) 13
Global economic growth is only marginally affected by an ETR GDP impacts in different world regions. 3 scenarios (in bn USD 2000, PPP) Total value of Absolute Percentage GDP, deviation of baseline (in HS 1 from HS 3 from billion USD baseline in 2000, PPP) 2020 EU-27 15, 931 -92 -0. 6 -297 -1. 9 OECD (non-EU) 27, 840 28 0. 1 -78 -0. 3 Emerging Economies 43, 699 53 0. 1 -688 -1. 6 8, 033 6 0. 1 -266 -3. 3 94, 926 -3 0. 0 -1, 313 -1. 4 Ro. W World total 14
Exports continue to grow in the baseline scenario Export developments in different world regions, baseline scenario Average annual growth rates 2000 -2005 -2010 -2015 -2020 In % (based on USD, 2000) EU-27 3. 1 2. 6 2. 9 OECD (non-EU) 7. 7 5. 1 3. 1 2. 5 Emerging Economies 5. 1 9. 3 5. 4 6. 1 Ro. W 8. 7 8. 3 5. 8 15
Export impacts are stronger with global cooperation Export impacts in different world regions, three scenarios Total value Absolute Percentage of exports, deviation of baseline, HS 1 from HS 3 from 2020 baseline in (PPP bn 2020 USD) EU-27 7972. 0 -60. 1 -0. 8% -264. 2 -3. 3% OECD (non-EU) 5505. 1 14. 1 0. 3% -29. 5 -0. 5% 11036. 0 19. 8 0. 2% -159. 2 -1. 4% 4913. 9 7. 4 0. 2% -73. 2 -1. 5% Emerging Economies Ro. W 16
Resource-intensive sectors loose out EU Exports: impacts of scenario SH 3 17
Continuous trend of increasing global resource extraction Global used material extraction of different material categories, baseline 18
Material extraction continues to grow Global used material extraction, 3 scenarios 19
A European ETR and global cooperation can decrease material extraction Total Absolute Percentage extraction, deviation of baseline, S 1 H in 2020 S 1 H from S 3 H in 2020 S 3 H from 2020 (in billion baseline in (in billion tonnes) 2020 tonnes) EU-25 6. 8 -0. 10 -1. 47 % -0. 24 -3. 6 % OECD (non-EU) 18. 7 0. 02 0. 10 % -1. 03 -5. 5 % Emerging Economies 31. 5 0. 01 0. 03 % -2. 23 -7. 1 % Ro. W 24. 2 -0. 08 % -0. 79 -3. 3 % Global 81. 2 -0. 09 -0. 11 % -4. 30 -5. 3 % 20
CO 2 emissions remain constant in the EU but increase elsewhere Energy-related CO 2 emissions in 4 regions, baseline (bn tonnes) 21
Global CO 2 emissions can hardly be reduced with EU measures alone 22
CO 2 emissions can be substantially reduced with global cooperation Impacts of an ETR on energy-related CO 2 emissions in HS 1 and HS 3 Total CO 2 Total emissions in change in baseline, HS 1 in 2020 (in Mt) EU-25 Relative change in HS 1, % in 2020 Total change in HS 3 in 2020 (in Mt) Relative change in HS 3, % in 2020 3776. 3 -318. 8 -8. 4 % -722. 4 -19. 1 % OECD (non-EU) 10244. 6 10. 4 0. 1 % -1829. 1 -17. 9 % Emerging Economies 14835. 5 2. 3 0. 02 % -2741. 9 -18. 5 % 5854. 9 0. 4 0. 01 % -141. 4 -2. 4 % 34526. 7 -272. 8 -0. 8 % -5398. 6 -15. 6 % Ro. W Global 23
Content 1. Background: The PETRE project 2. The GINFORS Model 3. Results 4. Policy recommendations 24
Combating climate change with global cooperation and global climate treaties • Large emerging economies will increase their share in CO 2 emissions • Unilateral action by the EU is insignificant in terms of global environmental sustainability • Participation of all OECD and emerging countries • Avoid carbon leakage 25
CO 2 emission targets are not sufficient to address climate change Targets to reduce EU CO 2 emissions (by 20 -30%) are not sufficient. Measures are needed to increase resource productivity and to limit resource consumption. Focus on CO 2 is too narrow (e. g. biofuels, nuclear energy) Address our unsustainable use of resources (root cause of climate change) Concerted action 26
Shared responsibility between producers and consumers • Increasing importance of embodied emissions in trade • Multi-regional IO models show that our CO 2 emissions would be higher (developing countries produce on our behalf) • Distribute costs to reduce GHG emissions between producers and consumers • Per capita allocations or global carbon tax 27
Address the conflict between economic and development goals • In important EU policy strategies (“Global Europe”, “Raw Materials Initiative”) the goals of access to and supply of raw materials and natural resources prevail over the objective of their sustainable and equitable use • Increase technical and financial assistance for climate change mitigation and adaptation • Placing access to resource efficient technologies outside the purview if IPR restrictions into the public domain / international public buyouts of patents on such technologies 28
Thank you! www. seri. at www. gws-os. de www. materialflows. net christine. polzin@seri. at lutz@gws-os. de stefan. giljum@seri. at 29
Scenarios Baseline with low energy prices (LEP) LB: • International energy prices: PRIMES 2007 (60 $2005/boe in 2020) • GDP and CO 2 adjusted to PRIMES 2007/WEO 2007 • ETS price: 18 Euro 2008/t CO 2 in 2020 Baseline HB: • Baseline as above but exogenous real oil price is assumed to rise after 2008 consistent with a $113/boe in nominal terms in 2010 and then to rise as in the PRIMES baseline (LEP above). • Gas and coal prices follow the oil price. • Energy prices consistent with IEA/WEO 2008 baseline Scenario 1: LS 1 • 2020 EU GHG emissions target (20%) met • Low energy prices (baseline LEP) • ETS price = ETR tax rate • ETS: 100% auctioning in 2020 • Material tax (15% ad valorem tax in 2020) • 100% revenue recycling: employer’s social security contributions (ETS material tax and carbon tax on corp. rev)/income tax (carbon tax on hh) • No further policy measures (RES, efficiency package etc. ) 30
Scenarios (part II) Scenario 2: HS 1 • 2020 EU GHG 20% target met • High energy prices • CO 2 price: 68 Euro 2008/t Scenario 3: HS 2 • As Scenario 2 • 10% recycling in low carbon technologies (RES and building insulation) • CO 2 price: 61 Euro 2008/t Scenario 4: HS 3 • As Scenario 2 • International cooperation • 2020 EU GHG emissions target (30%!) met • CO 2 price: 184 Euro 2008/t (OECD) • CO 2 price: 46 Euro 2008/t (emerging economies) 31
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