THE POLITICAL ECONMY OF THE POLITICAL ECONMY OF ENVIRONMENTALLY RELATED TAXES IN A ENVIRONMENTALLY RELATED TAXES IN A CONTEXT OF HIGH OIL PRICES CONTEXT OF HIGH OIL PRICES Jean- -Philippe Barde Philippe Barde Jean OECD Environment Directorate OECD Environment Directorate Session 3, Session 3, th Regional Seminar on Fiscal Policy 18 th Regional Seminar on Fiscal Policy 18 ECLAC, Santiago Chile ECLAC, Santiago Chile 24 January 2006 24 January 2006 1
CONTENTS CONTENTS Part 1: Background Part 1: Background Part 2: Energy and transport related taxes Part 2: Energy and transport related taxes Part 3: Dealing with competitiveness Part 3: Dealing with competitiveness 2
Part 1: BACKGROUND Part 1: BACKGROUND 3
Definition of environmentally related taxes � Any Any compulsory, unrequited compulsory, unrequited payment to payment to � general governmental levied on a tax- general governmental levied on a tax -base base deemed to be of particular environmental deemed to be of particular environmental relevance. relevance. � The The name or purpose name or purpose of the tax is not a of the tax is not a � criterion. criterion. � A tax can be earmarked, but this is not a A tax can be earmarked, but this is not a � criterion. criterion. � Levies paid to environmental funds outside Levies paid to environmental funds outside � “general government general government” ” are not included. are not included. “ � Information on fees and charges (requited Information on fees and charges (requited � payments) is, however, now also included in payments) is, however, now also included in 4 the database. the database. � www.oecd.org/env/policies/database
Per cent of GDP 5 0 1 2 3 4 5 6 Australia Austria Belgium Canada Czech Republic Revenues from environmentally related taxes Revenues from environmentally related taxes Denmark Finland France Germany Greece Hungary Iceland Ireland In per cent of GDP In per cent of GDP Italy 1995 Japan Korea Luxembourg 1999 Mexico Netherlands New Zealand 2003 Norway Poland Portugal Slovak Republic Spain Sweden Switzerland Turkey United Kindom United States Arithmetic average Weighted average
Per cent of total tax revenue 6 10 12 14 16 18 0 2 4 6 8 Australia Austria Belgium Canada Czech Republic Revenues from environmentally related taxes Revenues from environmentally related taxes Denmark Finland France Germany In per cent of total tax revenue In per cent of total tax revenue Greece Hungary Iceland 1995 Ireland Italy Japan Korea Luxembourg 1999 Mexico Netherlands New Zealand Norway 2003 Poland Portugal Slovak Republic Spain Sweden Switzerland Turkey United Kingdom United States Weighted average Arithmetic average
THE REVENUE OF ENVIRONMENTALLY THE REVENUE OF ENVIRONMENTALLY RELATED TAXES in OECD RELATED TAXES in OECD � 7 % of total tax 7 % of total tax � revenue (OECD revenue (OECD average) average) � 2.5 % of GDP (range 2.5 % of GDP (range � 1- - 5%) 5%) 1 7
USD per capita 8 1,000 1,500 2,000 2,500 500 0 Australia Revenues from environmentally related taxes per capita Austria Belgium Canada Czech Republic Denmark Finland France Germany Greece Hungary Iceland Ireland 1995 Italy Japan Korea Luxembourg 1999 Mexico Netherlands New Zealand 2003 Norway Poland Portugal Slovak Republic Spain Sweden Switzerland Turkey United Kingdom United States Weighted average Arithmetic average
TAX BASES TAX BASES � What matters is less the alleged purpose of the What matters is less the alleged purpose of the � tax, BUT the relevance of the tax base the relevance of the tax base. . tax, BUT � All in all, 375 ERT in OECD countries All in all, 375 ERT in OECD countries � � Energy Energy (150 taxes) (150 taxes) � Transport Transport (motor vehicles) 125 taxes (motor vehicles) 125 taxes � Waste (50 taxes) Waste (50 taxes) � Others (Water, Various products) 50 taxes Others (Water, Various products) 50 taxes 9
PART 2 PART 2 ENERGY AND TRANSPORT ENERGY AND TRANSPORT RELATED TAXES RELATED TAXES 10
ENERGY AND TRANSPORT RELATED TAXES ENERGY AND TRANSPORT RELATED TAXES � Most taxes are related to Most taxes are related to ENERGY ENERGY and and � TRANSPORT: represent about 90 % of the TRANSPORT : represent about 90 % of the total revenue. total revenue. � Mostly affect households. Mostly affect households. � � Industry pays very little environmentally Industry pays very little environmentally � related taxes. related taxes. 11
Remarks on motor fuel taxes Remarks on motor fuel taxes � Considerable variations between countries � Relatively low in US and Canada � High in E.U (15), Japan, Korea, Turkey � Significant increases in several countries (2000-2005). Increases in new EU Member States to comply with EU Directive � In many countries, lower taxes on diesel (environmental non-sense), except in Australia, Switzerland, UK and US 12
Are motor fuel taxes optimal? Are motor fuel taxes optimal? The optimal level of emissions Marginal MAC cost MEC A t* 13 O P* B Pollution
Parry and Small (2002) estimate the marginal estimate the marginal Parry and Small (2002) social cost of automobiles (environmental social cost of automobiles (environmental externalities and congestion) in UK and US. externalities and congestion) in UK and US. According to these estimates the optimal rate of According to these estimates the optimal rate of gasoline taxes in UK is lower lower than existing than existing gasoline taxes in UK is gasoline taxes in many countries, but much gasoline taxes in many countries, but much higher than in the US. than in the US. higher 14
Newberry (2005) estimates higher optimal rates estimates higher optimal rates Newberry (2005) for the UK: 0.6 € for the UK: 0.6 € per litre for gasoline, 0.67 per litre for gasoline, 0.67 € € per litre for diesel. per litre for diesel. According to these estimates, France, Germany According to these estimates, France, Germany and the Netherlands would tax at the and the Netherlands would tax at the approximate right level. approximate right level. UK would be taxing too high. UK would be taxing too high. 15
Tax rates on petrol and diesel in OECD member Tax rates on petrol and diesel in OECD member countries countries 0.8 Petrol, 1.1.2000 Petrol, 1.1.2005 Newbery 0.7 Diesel, 1.1.2000 (2005) Diesel, 1.1.2005 0.6 0.5 € per litre Parry & 0.4 Small (2002) 0.3 0.2 0.1 0.0 16 e y n n d e y d m y d d a l n y a a c l k y c a a i n r n a e a n a e d e i n n s d i r n e p r g g k l u d r a a t w d l a a a d a p n a t c a a e I o r n u c m a i g a e r s e l r l n l S r g i m n r m l K u a r i a u r u n e e J o t w F v l G o l t l b F o a l r l o e i c r P b r T e s A e o u a d n F r I l N o S d t u - u I b u e B r e r e a - e H P n e p m e z A P G Z p t D F a h t i S e e K e i d + R w t w R - x + a e - d u N e S d h S n k l N e a e L a c U a t F r e i C v e z n - o d C U - e l S a F d - a - n S a U C
Energy taxes in the context of high oil Energy taxes in the context of high oil prices prices � Between 1998 and the end of 2005 oil prices Between 1998 and the end of 2005 oil prices � increased by 229 % increased by 229 % � In 2005 alone by 40 % (with a peak of + 67 % In 2005 alone by 40 % (with a peak of + 67 % � in August). in August). 17
Total World Crude Oil Prices (Dollars per barrel) 50 45 40 35 30 25 20 15 10 5 18 0 Jan 22, 1999 Jun 25, 1999 Feb 11, 2000 Jan 04, 2002 Jun 27, 2003 Feb 13, 2004 Jan 02, 1998 Mar 20, 1998 Jun 05, 1998 Oct 19, 2001 Mar 22, 2002 Jun 07, 2002 Jan 24, 2003 Oct 01, 2004 Nov 06, 1998 Apr 09, 1999 Apr 28, 2000 Jul 14, 2000 Sep 29, 2000 Dec 15, 2000 Mar 02, 2001 May 18, 2001 Nov 08, 2002 Apr 30, 2004 Jul 16, 2004 Dec 17, 2004 Aug 21, 1998 Sep 10, 1999 Nov 26, 1999 Aug 03, 2001 Aug 23, 2002 Apr 11, 2003 Sep 12, 2003 Nov 28, 2003
Total World Crude Oil Prices (Dollars per barrel) 70 60 50 40 30 20 10 19 0 Jan 07, 2005 Jan 21, 2005 Jun 10, 2005 Jun 24, 2005 Jul 08, 2005 Jul 22, 2005 Feb 04, 2005 Feb 18, 2005 Mar 04, 2005 Mar 18, 2005 May 13, 2005 Oct 14, 2005 Nov 11, 2005 Nov 25, 2005 Apr 01, 2005 May 27, 2005 Sep 02, 2005 Sep 16, 2005 Sep 30, 2005 Oct 28, 2005 Apr 15, 2005 Apr 29, 2005 Aug 05, 2005 Aug 19, 2005
� Claim that government revenue will increase Claim that government revenue will increase � substantially (due to VAT) substantially (due to VAT) � Increased public opposition to gasoline taxes Increased public opposition to gasoline taxes � � Does that mean that energy taxes, in Does that mean that energy taxes, in � particular fuel taxes, should not increase or particular fuel taxes, should not increase or even decrease? even decrease? 20
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