environment-friendly tax structures for inclusive growth by - imf
TRANSCRIPT
1
Environment-friendly tax structures for inclusive
growth
Giuseppe Nicoletti OECD Economics Department
Rio+20 IMF side event on Tax and Subsidy Reform for a Greener Economy
21 Jun 2012
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Tax structures for inclusive green growth
Green taxes (or tradable permits) and elimination of environmentally harmful subsidies: – explicitly price environmental externalities, – increasing the cost of environmentally harmful behaviour – Improve competitiveness of clean technologies – Help equalise marginal abatement costs
As a result, they encourage – cleaner production and consumption – more efficient use of resources – Investment and innovation
… helping prevent future growth bottlenecks
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Tax structures for inclusive green growth
Green taxes raise revenues which can be used to: – Make growth more inclusive – Help with fiscal consolidation in high-debt countries – Reduce more growth-distortive taxation
Shifting tax structures from income taxation towards alternative revenue sources can boost growth – More entrepreneurial incentives and to work, save and invest – 1% point shift in revenue share can increase GDP p.c. by
0.6-2.3%
A green tax reform can have environmental, social and economic benefits
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Large scope for shifting to environmentally-friendly tax structures
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Per c
ent o
f GD
P
Energy Motor vehicles Other
*: 2009 figures
Env-related tax revenues in % of GDP, 2010
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Large scope for reducing env.-harmful subsidies
Subsidies to FF consumption in developing and emerging countries, up to 409 bn$ in 2008-10:
0 10 20 30 40 50 60 70 80 90
NigeriaVietnam
KazakhstanEquador
LibyaSouth Africa
QatarTurkmenistan
BangladeshMalaysiaThailand
KuwaitUkraineAlgeria
PakistanArgentina
IraqMexico
UzbekistanUAE
IndonesiaVenezuela
EgyptChinaIndia
RussiaSaudi Arabia
Iran
Billions of nominal U.S. dollars per year
Coal Oil Natural gas Electricity
Source: IEA WEO (2011)
Tot. support in OECD countries estimated at 45-75 bn$ recently
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Eliminating fossil fuel subsidies
Good for environment and good for growth Also good for equity if more targeted transfers
Multilateral subsidy removal would also
lead to 6% less greenhouse gas
emissions globally in 2050 than BAU
% point increase in GDP from unilateral subsidy removal
Source: OECD analysis based on IEA subsidy estimates
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Prices matter and induce substitution away from fuel use
Fuel-related tax base and oil price, OECD average
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
0.6%
0.7%
0.8%
0.9%
1.0%
1.1%
1.2%
1.3%
1.4%
1.5%
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
€per litre
Per c
ent
of G
DP
Motor fuels and other energy
Rotterdam spot price, unleaded petrol
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Prices matter – and spur efficiency
0
10
20
30
40
50
60
70
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Kt N
Ox
emitt
ed &
TW
h en
ergy
pro
duce
d
kt NOx emitted
TWh useful energy
-20
0
20
40
60
80
100
120
140
160
180
0 100 200 300 400 500 600 700 800 900
SEK
per
kg N
Ox
Emission intensity in kg NOx per GWh1991 1992 1994 1996
Decoupling of energy production and NOx emissions since 1992
Sweden’s charge on NOx emissions
Significant reduction of abatement costs
Source: OECD (2010), from SEPA (2008) and Höglund-Isaksson (2005)
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Prices matter – and spur innovation
Source: OECD Energy and Climate Policy and Innovation (2012). Based on estimation of sample of OECD economies over period 1978-2008. Results indication that if oil price is approximately equal to prices reached in 2008 oil shock => switch from fossil fuel combustion efficiency innovation to renewable energy innovation.
Patent counts
Innovation in fossil fuel combustion efficiency
Innovation in renewable energy
Post-tax oil price and patenting
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Principles of good green fiscal reform
Tax=marginal social damage of environmental externality
For same externality, tax uniformly across different emission sources
Cost-effectiveness and environmental integrity
But principles rarely complied with: e.g. diesel vs gasoline, implicit CO2 taxation, biofuel subsidies
Cost-benefit or multi-criteria analysis important to design green fiscal reform
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Why is green fiscal reform difficult? Uncertainties related to the valuation of effects
Proxy, measurement, monitoring and enforcement problems
Market instruments require well-functioning markets
Opacity on who pays and who benefits from subsidies
High “visibility” of taxation relative to other green policies (direct real
income losses)
Potential regressivity of some green taxes
Compet. issues for globally traded and public goods (e.g.GHG)
Need to design socially conscious and inclusive green fiscal reform
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Green taxes and inclusive growth
Additional revenues can be used to offset possible regressive effects of rebalanced tax and subsidy structure – Compensate households for increase in prices – Target transfers to low-incomes
Better pricing of ecosystem services can alleviate poverty in various ways: – Improved health from reduced pollution – Safer reliance on natural resources on which livelihoods of
poor hinge – Revenues can finance improved access to basic services
Recycling revenues to reduce labour income taxation can also push up employment, though not by much