Carbon tax

The CO2 tax (including carbon tax, English: carbon tax) is an environmental tax on carbon dioxide (CO2) and other greenhouse gases. The resulting from the emission of these greenhouse gases global warming and ocean acidification is to be controlled counter with a higher price for fossil fuels. The cost of climate impacts and environmental damage to the biodiversity of the ocean will cause businesses and consumers, the CO2 emissions will be notified with a clear price signal.

• 4.1 Australia
• 4.2 France
• 4.3 Canada (British Columbia)
• 4.4 Sweden
• 4.5 European Union

• 5.1 requirements and prohibitions
• 5.2 Emissions Trading

Basics

Basis of a CO2 tax are the CO2 emissions that result from the combustion of fossil fuels. Other greenhouse gases can involve on the design of their CO2 - equivalent in taxation. The design based on greenhouse gas emissions differs a CO2 tax of the energy consumed by design of the energy taxes, such as the German electricity tax. While energy taxes also include the use of renewable and nuclear energy, this is not the case with CO2 taxes.

Apart from CO2 taxation of energy may also be affected by many other taxes. The total tax burden of an energy carrier, converted to the costs associated with its use CO2 emissions is sometimes referred to as the implicit CO2 tax.

CO2 taxes are, like other environmental taxes also, a control effect. Through higher prices for goods and services that are associated with high CO2 emissions, the market will provide incentives to reduce emissions. Cost -minimizing economic operators to reduce emissions first on where it is most advantageous possible. For this purpose, they can develop low-emission modes of production re- use existing, switch to products that cause less emissions, or reduce the consumption of emission-intensive products. One counts CO2 taxes because of their indirect effect on the market price on the emission height of the market- based instruments of climate policy.

Shaping

Tax base: the tax base is usually the carbon content of energy sources or the greenhouse effect (global warming potential ). Therefore be measured CO2 equivalent emissions of those that are free in the use of energy sources. Here is determine which greenhouse gases are to be covered by the tax. Decentralized emission sources, such as methane emissions from agriculture can be difficult to detect and lead to high administrative costs. It is also conceivable, carbon sinks, such as forests from reforestation projects, to be provided with a "negative control ", so to subsidize (see also climate compensation ).

Tax rate: The tax rate determines the per unit of assessment, ie usually per CO2 equivalent payable amount of money. When determining the implicit tax amount is taken into account, the results from the inclusion of other, already existing taxes or subsidies. Example, in 1999 in many European countries the implicit tax per tonne of CO2 for coal under the natural gas. To a desired price, also in relation to other energy sources, and to achieve a certain emission reduction cost-effective, the introduction of a CO2 tax may be associated with other changes in the tax system, which degrades the existing favoring emission-intensive products.

The taxation stage of production: CO2 taxes can be levied at various stages along the production chain. In order to keep the administrative costs of control low, it is desirable to raise them to a few, easily controllable points. This suggests to levy the tax directly in the extraction or the import of fossil fuels. So also emissions are included because of Lekagen or other activities that would otherwise not be considered in later stages. If methods exist that bind permanently in later stages of the production chain CO2 or other greenhouse gases and dispose of, for example, carbon capture and storage (CCS ) or CC- usage, these avoided emissions would also include certain of the tax. The level of tax collection also affects the perception and thus the acceptance of the control in the population.

Border Tax Adjustments: A country may, to the extent consistent with international trade law, levy customs duties and taxes on imported goods or refund emission taxes on exported goods. This may on the one hand serve to avoid the disadvantages of companies in international competition. On the other hand, it may also serve to " embedded emissions ", ie Emissionem arising abroad in the production of imported goods, and involve the transfer of emission-intensive production, the so-called carbon leakage to avoid abroad.

Gradual introduction ( phase-in ): CO2 taxes are usually introduced gradually and increased in order to facilitate the adaptation of the economy.

Use of tax revenues: See section Use of revenues.

Effects

The CO2 tax increases the price of the taxed carbonaceous products. This not only leads to an incentive to reduce emissions, but may, in part depending on their design, draw a number of other consequences.

Reduction of greenhouse gas emissions

A CO2 tax is primarily intended to achieve specific emission reductions in greenhouse gases or to maintain a certain limit for the total emissions of a country. The State is required in the design of control but not directly the emission amount, but it indirectly affects the price. He should know not exactly in the rule of what it will actually achieve the desired amount of emissions. Among the unknown factors include:

• Inflation, which reduces the net amount of tax that
• The price elasticity of market participants, ie the extent to which they respond to a given price change,
• Innovations that enable a less emission-intensive production, or
• The introduction of new products into the market that can trigger new, unforeseen loads.

Therefore, some States provide for adjustment of the tax amount in practice. For example, the Scandinavian countries have coupled the level of their tax against inflation.

Reducing other environmental damage

With the burning of fossil fuels usually go environmental damage caused by emissions of other pollutants associated, for example, air pollutants such as particulate matter or sulfur dioxide. By the CO2 tax, the use of fossil fuels is reduced, so it also reduces other environmental damage. These are mainly short-term and regional effects. Several studies come to some major, additional environmental benefits in the amount of two to several hundred dollars per avoided tonne of CO2.

Competition effects

A CO2 tax leads to higher costs of emission-intensive production factors. This has an impact on the competitiveness of industries within the country if the tax is not levied in all areas equally, and in international competition. Companies will usually require some time and investment to convert their production to lower-emission technologies and goods. In the short term they are therefore opposite the tax less affected companies at a disadvantage if they can not pass on to their customers higher costs. Competitive disadvantages could even induce firms to relocate their production to lower cost locations. Extent to which enterprises not only short but also at a disadvantage in the long term depends on how well the emission intensity of production can be reduced. In the long term could also arise Wettberwerbsvorteile, when triggered by the appropriate tax innovations and efficiency improvements (Porter hypothesis).

Competitive disadvantages can be mitigated through targeted use of tax revenues (see # use of revenues ) or tax relief, the latter being the control less effective.

Because the tax is only one of the many factors influencing the competitiveness of their competitive effect is difficult to investigate. Early studies from the 1990s indicated out that competitive disadvantages were rather insignificant. They found evidence that energy-intensive industries, such as oil refineries, aluminum production and cement plants, some investment and production have shifted. At any competitive advantages according to the Porter hypothesis, there was at this time no clear findings.

Incentives for innovation

A CO2 tax creates incentives for environmental innovations, such as more fuel-efficient processes and improved goods or the use of renewable energies.

Distributive effects

Particular attention will have the distributive effects of CO2 taxes received. Here we consider the effect of the tax under Tax shifting: companies will try to pass on cost increases to customers. If the tax is not passed in the full amount to consumers, it has an impact on corporate profits and labor income. Next Shared costs lead to higher consumer spending or reduced consumption.

• The question here is primarily the extent to which households are charged in relation to their income and wealth through the tax unequal. In addition to higher prices for electricity, heating and transport costs also changes in prices of other products consumed are taken into account.
• The advantages of a CO2 tax may be unevenly distributed. From the reduction of other, often regional environmental damage, such as improved air quality, primarily benefit the affected local populations.
• Households may also differ benefit from the use of tax revenues.

Total CO2 taxes are more regressive. That is, low-income households are burdened relatively more. This is mainly because they spend a greater proportion of their income on heating and electricity. However, not all studies have come to this conclusion, individual case studies were also proportional loading, ie no redistribution effect, or a slightly progressive effect, ie a relatively higher burden of wealthy households. A slightly progressive effect, at least in the European Union, there seems to be in the transport sector. About the targeted use of tax revenues, for example in the form of tax and duty concessions that benefit primarily lower-income households, the government can correct regressive effects of the tax. Alternatively, it can also exclude heating energy and budgetary power up to a certain limit of the control or set a lower tax rate for this. In Switzerland, the CO2 incentive tax per head are to be redistributed.

Use of revenues

Tax Reform: You can also serve to reduce other, distortionary taxes, such as payroll taxes or social security contributions. If the total expected revenue provided for this purpose, then one speaks of a revenue-neutral tax. The double -dividend hypothesis states that the tax can be cost neutral by such other economic advantages, such as higher employment numbers.

Financing of environmental programs: tax revenues can be earmarked for research, development and use of renewable energy or fuel efficient products. In this case, they may trigger further reductions in emissions, or reducing other environmental damage.

Compensation measures: they can serve to mitigate distributive effects or competition effects of the CO2 tax, for example through tax breaks or subsidies elsewhere.

Updates in the general budget: they can be recognized as revenue in the state budget, without that they are reserved for specific purposes. The state simply achieved higher revenue.

CO2 tax in individual countries

Australia

Under Prime Minister Julia Gillard, a carbon tax was introduced in 2012. The responsible authority is the Department of Climate Change and Energy Efficiency. More than 50 % of the revenue to reduce the burden of households and severely affected companies. The tax rate was initially at 23 AU $ per tonne of CO2 (about 24 U.S. $) and increasing annually by 2.5%. As of July 2015 Emissonshandelssystem is to replace the control. The 2013 newly elected in the general election in Australia government under Prime Minister Tony Abbott plans to abolish the tax again.

France

From 2014, the French tax on motor fuels and heating fuels, the tax intérieure de consommation sur les produits énergétiques ( TICPE ), contain a carbon content proportionate share, the so-called " climate-energy contribution" (contribution climat énergie (CCE ) ). In 2014 he is seven euros per tonne of CO2. This year, the fixed, independent of the carbon content of the tax is lowered in the same amount, so that the tax level in 2014 as a whole remains unchanged. In subsequent years, the CCE increases without further compensation to 14.50 € (2015 ) and 22 € (2016) per tonne of CO2. With the income the French government wants to promote the expansion of renewable energies.

Canada (British Columbia)

In the Canadian province of British Columbia (BC), a carbon tax was introduced in July 2008 in the amount of 10 C $ per tonne of CO2 equivalent on fossil fuels, the revenue should be used to reduce other taxes and thus should be revenue neutral. The tax rate was gradually increased to C $ 30 in 2012.

Since the introduction of the tax, the per capita consumption of these fuels has declined by 17.4 % in BC, while it increased by 1.5 % in the rest Kanda. The gross domestic product is like in the rest of Canada has increased over the same period. Due to the CO2 tax, the income tax could be reduced in BC, it was 2012, the lowest compared to other Canadian provinces. A study from the year 2013 has come to the preliminary conclusion that it is a very effective measure, which has effectively reduced the consumption of fossil fuels without having a negative effect was observed on the overall economy.

Sweden

In 1991 a CO2 tax was introduced in Sweden. With the introduction of this tax, the energy tax have long collected were halved. The tax revenues flow into the general state budget. The tax rate increased from initially 27 euros per tonne of CO2 to 110 euros in 2010. Sweden has by all OECD countries, by far the highest implicit tax rate on CO2.

Various sectors of the economy will be charged very differently by CO2 and energy taxes. Particularly high taxes, private consumption, wholesale and retail, the public sector and services. Various industries that face international competition, however, pay significantly lower tax rates, in 2010 there were about 21 % of the full CO2 tax rate. This share is expected to rise to 60 % by 2015. In 2005 more Exceptions were provided to avoid double taxation by the introduced this year, the EU emissions trading for some industries.

Between 1990 and 2008, greenhouse gas emissions fell by almost 12 %. To what extent this can be on the CO2 tax or other instruments, such as emissions trading and energy taxation, attributed, is difficult to determine, estimates are 0.2 % to 3.5 %. During the same period, the gross national product doubled. Sweden is considered as an example, how can agree on the reduction of greenhouse gas emissions and economic growth.

European Union

The EU Energy Tax Directive ( 2003/96/EC ) is 27 October 2003 as a framework legislation in the European Union, the legal basis for individual CO2 taxes, such as the fuel tax in the nation states. Here also minimum tax rates and tax exemptions are set. The consumption of energy is responsible for 79% of total greenhouse gas emissions according to the EU. Therefore, the European strategy have 2020 Member States to set national targets for energy efficiency in the context. Against this background, the Commission has presented a proposal for an amendment of the Energy Tax Directive ", which will allow Member States to create a framework for CO2 taxation on the domestic market.

Comparison with other instruments of climate policy

Requirements and prohibitions

The policy can regulate emission sources directly above requirements. These include, in Germany emission standards that specify, among other things limits for CO2 emissions for motor vehicles, or the prohibition of certain fluorocarbons in mobile air conditioning systems. Manufacturers are required to meet these criteria, even if they could reach a higher emission reduction at the same cost elsewhere. A market-based approach as the CO2 tax can beat Mark Eueren this latitude, be expected from their lower abatement costs compared to a circulation policy.

Emissions trading

In international agreements, it is so far the Emissions Trading, which is used as a market-based instrument of climate policy. There is hereby established a maximum amount of emissions. Participants must buy allowances to emit greenhouse gases allowed. The rights are tradable. This case, therefore, a maximum quantity of emissions is given, while the price is variable, one speaks of the set-based approach. In contrast, puts at a CO2 tax policy determined the price, while the emission amount may vary, so it is a price-based approach ( standard price approach).

The two instruments differ in their effect if price or quantity can not be set to exactly the level at which the abatement costs will be offset exactly by the avoided damages. This is for example the case when damage and abatement costs are not precisely known. The damage of global warming increase with the amount of greenhouse gases emitted in the short term probably be rather slow, while avoiding costs rise sharply. A not set at the optimum height CO2 tax is the goal probably little miss in this case, while not optimal fixed amount of emissions it hard to miss and therefore attracts higher short-term economic losses. In the long term, however, can be expected through innovation rather relatively slowly rising abatement costs and disproportionate increase in damage. In this case, a fixed, tradable amount hit your target likely to be less strong and comes to the long-term national economic optimum closer. Emissions trading and taxes complementary instruments of climate policy can be.

In Annex B of the Kyoto Protocol called states have committed to participate in international emissions trading, and to comply with certain emission limits. The instrument of international emissions trading can be complemented by national instruments to meet specific reduction commitments. The CO2 tax can take on the role of such a national instrument, and for example in sectors that are not covered by the ETS, causing reductions. Thus, for example, occupies France from 2014 are not covered by the EU Emissions Trading automobile fuels and heating fuels with a " climate-energy contribution ."

Criticism and discourses

For developing countries, the design of a CO2 tax may pose particular difficulties. You are more likely to struggle with ineffective institutions for tax collection. In addition, poor households are often active only in informal sectors of the economy and are not covered by social programs under certain circumstances. Compensatory measures lessen the regressive effects of a CO2 tax for poor households, can be particularly difficult here.