Gr Gree een Fi Fiscal l Reform to o Promot ote Cir Circul - - PowerPoint PPT Presentation

Gr Gree een Fi Fiscal l Reform to

• Promot
• te Cir

Circul ular r Econ

• nom
• my

– Pot

• tentia

ial l Ne New Tax Op Opti tions in n Fi Finl nland

Sarianne Tikkanen

Panel Session on Best Practices and Policy Requirements to Achieve Circular Economy Objectives WCERE 2018 - Gothenburg, Sweden 27th June 2018

Bes Best t Practi tices and nd Fi Fiscal l Reform for

• r a

a Cir Circula lar Economy in n Fi Finland -pr project

Funded by Sitra - the Finnish Innovation Fund Consortium: Green Budget Europe GBE (head of consortium)

• Eero Yrjö-Koskinen & Sarianne Tikkanen

Ex’tax –project

• Femke Groothuis, Valérie-Isabelle van de Luitgaarden & Peter Gersen

Institute for European Environmental Policy IEEP

• Emma Watkins & Jean-Pierre Schweitzer

Cambridge Econometrics

• E3ME macroeconomic model

27th June 2018 SARIANNE TIKKANEN - GBE

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Go Goal an and focu

• cus of
• f the

he pr project

Main goal of the project

• to boost implementation of the Finnish national roadmap to a circular

economy in practice.

Two tasks of the project

1) Identify economic instruments and best practices to promote circular economy goals 2) Present an ambitious scenario of green fiscal reform that aligns fiscal policy with a carbon neutral circular economy

• identify new tax options for a fiscal reform
• assess impacts of the fiscal reform by modelling

27th June 2018 SARIANNE TIKKANEN - GBE

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27 June 2018 GREEN BUDGET EUROPE 4

En Envir ironment and nd Res esource Taxes in n Fi Finland

En Envir ironmental tax bases in n Fi Finland

Energy and Carbon taxation

• from 1990: now EUR 62/tonne of carbon dioxide for all fuels
• not effective rate because of the tax reliefs and reductions

Transport taxes according to CO2 emissions

• Car tax (registration tax)
• Annual vehicle tax

Waste Related Taxes

• Landfill tax, EUR 70/tonne of waste
• Tax on certain beverage containers + deposit-refund scheme

= very effective instrument mix

No resource taxes, only minor fees

• Hunting and Fishing Fees

27th June 2018 SARIANNE TIKKANEN - GBE

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En Envir ironmental tax ax revenues - € 6.1 bi billio ion 2015

• 7

7 % % of total al tax ax reven enue ues (20 2015) 15)

• 3.1

1 % of GD GDP

27th June 2018 SARIANNE TIKKANEN - GBE

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Shar Share of

• f revenues by

by en environmental tax base bases

27th June 2018 SARIANNE TIKKANEN - GBE

Tax shif hift fr from

• m labo

abour r taxation to

• ener

energy taxes

Tax shifts from labour to environmental taxation has been taken place in several

times and nearly in every budget. Years 1996 - 1998

• Labour tax cutting
• Energy tax increase
• Introduction of waste tax

Years 2008 – 2011 Green tax reform

• Labour tax cutting by removal of employers social security contributions
• Energy tax increases
• During 4 years labour tax cutting altogether about € 2 billion

State budget 2018

• Labour tax cutting by over € 300 million
• Compensation by increases of
• energy tax for heating € 52 million
• tax for alchohol and tobacco

27th June 2018 SARIANNE TIKKANEN - GBE

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Lab abour taxation is is still ill hi high in in Fin Finland

• over half

half of

• f all

all tax and and tax-like revenues

Nee eed for

• r cha

changes in in the he tax stru ructure

• Optio

ions for

• r ne

new tax ax bas bases

Ci Circular eco economy goals

• als and

and fi fiscal ins nstruments

June 14, 2018

EX’TAX, GBE, IEEP 11

• 1. Minimizing the use of virgin natural resources
• Resource taxes
• Pricing of CO2 emissions
• 2. Prolonging the lifetime of products
• Cutting labour taxes to boost service based

business models

• Incentives for research and development
• 3. Recycling of waste as material
• Waste related taxes

Na Natu tural reso esource tax op

• pti

tions: : mine neral extraction

• n

June 14, 2018

EX’TAX, GBE, IEEP 12

• Mining tax for metal minerals
• Mining tax for industrial minerals
• Aggregates tax

 Sand, gravel and crushed rock

Rationale

• Closing loop on material recycling
• Internalizing environmental costs of mineral extraction
• Reducing environmental risks to

groundwater

Example EU

• Sweden: EUR 1.2 per tonne
• f natural gravel
• UK: EUR 2.48 per tonne of

sand, gravel and rock

Tax op

• pti

tion for

• r use

use of

• f water

June 14, 2018

EX’TAX, GBE, IEEP 13

• Water abstraction or water use tax

Rationale

• Closing loop on water
• Driving efficiencies
• Saving energy

Many examples in EU

• Denmark
• Netherlands
• Germany
• Belgium
• Poland
• Italy

Ag Agricult lture rela elated tax op

• pti

tions

June 14, 2018

EX’TAX, GBE, IEEP 14

• Fertilizer tax

 Apply only to mineral fertilizers

• Pesticide tax

Rationale

• Closing loop on nutrient recycling
• Internalizing cost of environmental and health risks of pesticides

Example EU

• Sweden:

active ingredients of pesticides

• Denmark:

phosphorus in animal feed

Tax op

• pti

tion for

• r non

non-energy use use of

• f fos
• ssil fuels

fuels

June 14, 2018

EX’TAX, GBE, IEEP 15

• Tax for non-energy use of fossil fuels

 Resource tax for mineral oil used in plastic, rubber, painting and other chemical industry

Rationale

• Closing loop on plastic material recycling and driving efficiencies
• Polluter pays principles: internalizing environmental costs of plastics
• Substituting fossil-based materials with recycled / renewable

materials

Example EU

• No examples but studies

and discussion in Germany and the Netherlands

Ene Energy y an and carbon tax op

• pti

tions

June 14, 2018

EX’TAX, GBE, IEEP 16

• Carbon price floor
• Remove of energy tax subsidies

 energy-intensive industry  lower electricity rate for industry, mining, data centers  diesel and light fuel oil

Rationale

• Phase out fossil fuel subsidies
• Level playing field between fuels
• Polluter pays principle

Example EU

• UK Carbon Floor Price (2013)

to complement EU ETS EUR 20/tCO2

Transport rela lated tax op

• pti

tions

June 14, 2018

EX’TAX, GBE, IEEP 17

• Air passenger duty
• Air freight duty

Rationale

• Level playing field between transport
• Polluter pays principle
• Phase out subsidies for fossil fuels used in planes

Example EU

• Sweden (2018)

EUR 6 - 39 depending

• n distance

Was aste rel elated tax op

• pti

tions

June 14, 2018

EX’TAX, GBE, IEEP 18

• Incineration tax
• Nuclear waste tax

Rationale

• Closing loop on material recycling
• Application of EU waste hierarchy
• Internalizing health risks of long lasting nuclear waste

Example EU

• Denmark: incineration tax

EUR 35/tonne

• Spain: tax on nuclear waste

EUR 6.6 – 7.8/MWh

Lab Labour tax red eductio ion op

• pti

tions

June 14, 2018

EX’TAX, GBE, IEEP 19

• Personal income tax reduction
• Social security contributions reductions
• Payroll tax credit for new employment
• Payroll tax credit for circular economy services and innovations

Rationale

• Finland has a high tax wedge for labour
• Boost labour-intensive

and service based circular economy business models

Coh Coherent an and sm smart mix ix of

• f ins

nstr truments

June 14, 2018

EX’TAX, GBE, IEEP 20

Fiscal instruments are only one part of the regulatory system

• need for justification with other instruments e.g.

 Renewing of business subsidies  Increasing of R&D subsidies  Extended producer responsibility  Green public procurement  Ecodesign directive  Etc.

www.green-budget.eu @greenbudget_EU

Th Thank you

• u for your attention!

@greenbudgetEU Green Budget Europe

27th June 2018 SARIANNE TIKKANEN - GBE

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SARIANNE TIKKANEN Project manager Green Budget Europe HELSINKI

• Tel. +358 50 594 5267

Sarianne.Tikkanen@ green-budget.eu

Photos used in the presentation are my own or from pixabay.

Thank you for your attention!