18 January 2008 - By
Mikael Skou Andersen - Large energy-intensive
companies in Europe benefit from far-reaching
exemptions from the carbon-energy taxation
introduced in member states. Competitiveness
concerns as a rule underlie provision of
special rebates to the biggest
emitters. The size of the rebate and thereby
the actual climate bill to companies are
however difficult to unravel. With the final
report from the large-scale EU project COMETR
it has now been possible both to put figures
on the real tax levels as well as evaluate
their significance for competitiveness in
industrial sectors.
Energy-intensive industries,
e.g. producers of cement, iron and other
metals, glass, and basic chemical products,
are responsible for two-thirds of the total
CO2 emission from industrial activities
in Europe . Therefore, these industries
are central to the issue of curbing emissions
of CO2.
The new report from
COMETR demonstrates that the most energy-intensive
industries pay gross carbon-energy taxes
that constitute between 1 and 5 per cent
of their gross operating surplus. The value
of reduced employers’ social security contributions
and energy savings, however, should be deducted
from this tax burden. In so doing, the bill
falls to below 2 per cent of the gross surplus.
Only in Sweden does the burden reach a level
of 3 per cent in certain branches.
Evaluated in terms of
the companies’ gross value added, the tax
in almost all sectors is under half a per
cent and several times lower than the value
of the continual improvements in energy
productivity, which are only to some extent
driven by the taxes themselves.
While nominal carbon-energy
taxation levels in a range of EU countries
are 10-20 euro per tonne CO2, the majority
of energy-intensive companies in practice
pay the EU minimum rates of 1-2 euro per
tonne CO2 (and 8 euro for mineral oil).
In Denmark , the most energy-intensive industry
however pays on average 7 euro per tonne
CO2 due to the high rate for heat.
Economists from the
UN climate panel assess that the cost of
CO2 in coming years needs to reach 20-30
euro per tonne CO2 for all fuels and emissions
in order to avoid a global climate change
of over 2 degrees. This can be achieved
by combining a CO2 quota scheme with carbon-energy
taxation on emissions not covered by the
quotas or grandfathered free of charge.
Increased metal recycling
The iron and metal industry is most vulnerable
to competitive disadvantage from rising
CO2 costs. Other energy-intensive branches,
e.g. glass and cement, are not so vulnerable
in this regard and are better able to pass
the price increases on to the consumers.
Using recycled metal could reduce CO2 emissions
from the iron and other metals industry
to a fifth of its level, but globally the
amount collected is not sufficient in relation
to demand.
Announcement of changes
in the CO2 quota scheme are expected in
the EU Commission’s climate and energy package,
which will be published on 23 January, while
proposals for changes in the Energy Taxation
Directive and the guidelines for State Aid
will be announced later this year. The results
of the COMETR project will be of interest
for anyone wanting to evaluate the EU’s
new proposals in relation to the impact
and effect of the current CO2 cost levels
at a national level.
COMETR
COMETR is an EU research project under the
EU’s 6th Framework Programme, the ‘Scientific
Support to Policies’ initiative.
Environmental economists
from five European countries participated
in the project, the aim of which was to
shed light on the competitiveness effects
of environmental tax reforms on industry.
Prof. Mikael Skou Andersen from Denmark
’s National Environmental Research Institute,
University of Aarhus headed the project,
which was implemented in 2005-2007.
Where economic models
are usually employed to predict future trends,
the economists in this research project
worked with historic data. The environmental
tax reforms in Denmark , Finland , Germany
, Sweden , the Netherlands , Slovenia ,
and the UK were examined.
The research team has
collected detailed data for energy consumption,
tax payments, energy prices, fuel selections
and CO2 emissions. The many data are used
in the empirical macroeconomic model E3ME,
developed by Terry Barker from the University
of Cambridge and one of the most detailed
and realistic in the world for treatment
of the energy sector and the economic trade
between EU member states. With the help
of econometric techniques the effects of
carbon-energy taxation have been disentangled.
