scholarly journals THE IMPACTS OF IMPLEMENTING THE CARBON TAX ON FOSSIL FUELS: A HYBRID CGE ANALYSIS FOR INDONESIA

2018 ◽  
Vol 40 (2) ◽  
pp. 91-105
Author(s):  
Herbert Wibert Victor Hasudungan

This paper investigates the environmental and economic impacts of introducing the CO2 taxation on carbon-based fuels using a detailed disaggregation of energy-economy-environmental CGE model for Indonesia. The carbon tax has yet to be implemented in Indonesia. However, this instrument has been considered in the Ministry of Finance report as one of the governments fiscal strategic framework to finance the countrys action plan in commitments to reduce the GHG emissions. Suppose that the government levies the tax of Rp. 100,000/ton CO2e under two possible revenue-recycling scenarios: the carbon tax revenue is recycled through a reduction of labour income tax rate or an increase of government spending on commodities. For comparison purpose, we also implement the non-compensated scenario of which the additional revenue from carbon tax is kept as government savings to run budget surplus. Overall, the results suggested that the carbon tax reduces the national emissions but adding more costs to the economy,resulting a fall in GDP. In terms of income distribution, the carbon tax tends to be progressive in both scenarios of revenue-recycling. However, when there is no compensating mechanism, the carbon tax tends to be regressive - the poorer households carry a higher share of the carbon tax burden.

2020 ◽  
Vol 246 ◽  
pp. 00020
Author(s):  
Georg Erdmann ◽  
Aaron Praktiknjo

The typical proposition of economists to solve the greenhouse gas problem (GHG) is that governments should put a price on these emissions. As human behavior can be influenced by prices, high prices on GHG emissions would imply lowering these emissions. One reaction would be to substitute the burning fossil fuels by non-fossil fuels such as wind, photovoltaics, geothermal and hydropower, eventually nuclear. The second would be innovations towards satisfying human needs by less energy. The third would be to avoid the GHG emissions by carbon capture and storage technologies. However, putting a price on GHG emissions requires political actions. Politicians have basically two alternatives. One would be to introduce a fiscal tax on GHG emissions, whereby the tax rate represents the price of the emission. The other is to implement a cap-and-trade system for GHG emissions, which requires that companies have to cover each emission unit by an emission right issued by the government. When these emission rights are traded, the market price of these rights represents the emission price. Common to both systems are sanctions on companies that do not comply. Today both systems have been implemented somewhere in the world to control GHG emissions so that their comparable benefits and disadvantages can be studied in reality.


2021 ◽  
Author(s):  
Filda C. Yusgiantoro ◽  
◽  
I Dewa Made Raditya Margenta ◽  
Haryanto Haryanto ◽  
Felicia Grace Utomo

1. This report shows that six G20 countries (Japan, South Africa, Argentina, France, Ireland, and Mexico) and one ASEAN Member States (Singapore) have implemented a carbon tax. 2. The energy sector is the primary GHG emissions contributor in most member states, except Indonesia. However, the energy sector in Indonesia will highly contribute to the national GHG emissions considering the rise of energy demand due to economic and population growth. 3. The effectiveness of carbon tax is specific to which sectors are taxed and which sectors are exempt to a country member. Specifically, a higher emissions price may not cover a large share of emissions in the country. The high carbon tax in France only covers 35% of total emissions in its jurisdiction. Meanwhile, Japan and Singapore’s low carbon tax covers 75% and 80% of total emissions in their jurisdiction, respectively. 4. The numbers of sectoral coverage by emissions price will impact the level of revenues generated from the carbon tax. France obtained the most significant carbon tax revenue for more than USD 9.6 billion. Meanwhile, Argentina generated less than USD 1 million, likely due to tax exemptions in natural gas commodities. 5. The contribution level of carbon tax revenue to the government’s total revenue varies for each country. France and Ireland’s carbon tax revenue contributes 0.71% and 0.53% of their total government revenue, respectively. Meanwhile, the rest of the countries’ carbon tax revenue contributed less than 0.3% each to their government revenue.


SERIEs ◽  
2020 ◽  
Vol 11 (4) ◽  
pp. 369-406 ◽  
Author(s):  
Nezih Guner ◽  
Javier López-Segovia ◽  
Roberto Ramos

AbstractCan the Spanish government generate more tax revenue by making personal income taxes more progressive? To answer this question, we build a life-cycle economy with uninsurable labor productivity risk and endogenous labor supply. Individuals face progressive taxes on labor and capital incomes and proportional taxes that capture social security, corporate income, and consumption taxes. Our answer is yes, but not much. A reform that increases labor income taxes for individuals who earn more than the mean labor income and reduces taxes for those who earn less than the mean labor income generates a small additional revenue. The revenue from labor income taxes is maximized at an effective marginal tax rate of 51.6% (38.9%) for the richest 1% (5%) of individuals, versus 46.3% (34.7%) in the benchmark economy. The increase in revenue from labor income taxes is only 0.82%, while the total tax revenue declines by 1.55%. The higher progressivity is associated with lower aggregate labor supply and capital. As a result, the government collects higher taxes from a smaller economy. The total tax revenue is higher if marginal taxes are raised only for the top earners. The increase, however, must be substantial and cover a large segment of top earners. The rise in tax collection from a 3 percentage points increase on the top 1% is just 0.09%. A 10 percentage points increase on the top 10% of earners (those who earn more than €41,699) raises total tax revenue by 2.81%.


2020 ◽  
Vol 108 (5-6) ◽  
pp. 502
Author(s):  
Jean-Pierre Birat

After overusing the expression Sustainable Development, some action plan was needed to switch from rhetorical to transformational change. One of the answers was to propose the word Transition as a roadmap leading to the necessary level of change. A Transition is a passage from one stable regime to another, with a step that is neither instantaneous nor dangerous, like a Revolution, but is fast enough, anyway. The first Transition in the 2010s was the Energy Transition, i.e. a move towards less fossil fuels and more renewables. It started everywhere more or less at the same time, but Germany and its Energiewende was among the first contenders. The implicit objective was as much to control excessive anthropogenic GHG emissions as it was to possibly start a new period of growth based on green technologies. Very soon, however, the Fukushima disaster convinced Mrs. Merkel to change tack and veer towards “zero nuclear power”, thus aligning with the program of the Green movements. At that point, the Energiewende had become a complex, multi-objectives program for change, not a simple Transition as described at the onset of the paper. The rest of the world turned to Globish and spoke of the Energy Transition (EnT). Each country added a layer of complexity to its own version of the EnT and told a series of narratives, quite different from each other. This is analyzed in the present article on the basis of the documents prepared by the “energy-community”, which assembles hard scientists and economists, a group that the soft scientists of SSH call STEM. EnT, in its most recent and mature version, hardly speaks of energy any more but of GHG emissions. Therefore, EnT drifted towards the expression Ecological Transition (EcT). Both expressions are almost synonymous today. From then on, myriads similar expressions sprang up: Environmental Transition, Demographic, Epidemiological and Environmental Risk Transition, Societal Transitions, Global Transitions, Economic Transition, Sustainability Transition, Socio-Ecological Transitions, Technology Transitions, Nutrition Transition, Agro-Ecological Transition, Digital Transition, Sanitary Transition as well as various practices like Energy Democracy or Theory of Transition. Focusing only on EnT and EcT, a first step consists in comparing energy technologies from the standpoint of their impact on public health: thus, coal is 2 or 3 orders of magnitude worse than renewable energy, not to speak of nuclear. A second step looks at the materials requirement of Renewables, what has been called the materials paradox. They are more materials-intensive and also call on much larger TMRs (Total Materials Requirement). On the other hand, the matter of critical materials has been blown out of proportion and is probably less out of control than initially depicted. A third step is accomplished by Historians, who show that History is full of energy transitions, which did not always go in one direction and did not always match the storytelling of progress that the present EnT is heavily relying on. Moreover, they flatly reject the long-term storytelling of History depicted as a continuous string of energy transitions, from biomass, to coal, oil, gas, nuclear and nowadays renewables. Just as interesting is the opinion of the Energy-SSH community. They complain that the organizations that control research funds and decision makers listen mainly to the STEM-energy community rather than to them. And they go on to explain, sometimes demonstrate, that this restricts the perspective, over-focuses on certain technologies and confines SSH to an ancillary role in support of projects, the strategy of which is decided without their input: the keyword is asymmetry of information, which therefore leads to distortion of decision-making. They also stress the need for a plurality of views and interpretations, a possible solution to the societal deadlocks often encountered in Europe. As important and strategic as energy issues are in our present world, the hubris of both STEM and SSH communities may be excessive. Some level of success in making them work together may be a way to resolve this situation!


2020 ◽  
Vol 12 (4) ◽  
pp. 1385 ◽  
Author(s):  
Shengzhong Zhang ◽  
Yingmin Yu ◽  
Qihong Zhu ◽  
Chun Martin Qiu ◽  
Aixuan Tian

Previous literature has shown that manufacturers’ choices between radical and incremental green innovation modes can greatly impact the tradeoff between industry growth and carbon emission reduction. Yet, how the government can motivate manufacturers to implement radical green innovations to reduce carbon emission is unclear. In this paper, the researchers construct an evolutionary game model to analyze the joint impacts of carbon tax and innovation subsidy on manufacturers’ choices of green innovation mode. We derive the conditions for manufacturers’ stable strategies. Based on those results, we find that four factors—carbon tax, innovation subsidy, consumer green preference, and manufacturers’ capabilities of absorbing and adopting new technologies—may facilitate the choice of radical innovation. Furthermore, we conduct numerical simulations to verify the theoretical results, and further illustrate how the synergy of carbon tax rate and subsidy level affects the evolution of the green innovation mode choices. Specifically, we demonstrate the superiority of portfolio policy in the early stage of green innovation over single policy. In contrast, in the later stage, it is carbon tax but not innovation subsidy that remains effective. We discuss the insights for the government to formulate appropriate environmental policies to effectively promote the adoption of green innovation and reduce carbon emission.


2012 ◽  
Vol 52 (1) ◽  
pp. 195
Author(s):  
Doug Young

The Clean Energy Act (CEA) and its related legislation received royal assent on 18 November 2011, ushering in a new era for the Australian industry, and for those who deal with it. Building on the 2007 National Greenhouse and Energy Reporting Scheme (NGERS), which mandates the measurement and reporting of greenhouse gas emissions and electricity production and consumption, the CEA imposes direct obligations on: individual industrial operations (facilities) that emit more than 25,000 tonnes of carbon dioxide, or its other equivalent greenhouse gases, from particular sources, in a year; suppliers of natural gas (at the point of last supply before the gas is burnt or otherwise used), for the emissions that will be generated when the gas is burnt; and, operators of land-fill facilities, such as local councils. While the primary emissions targeted by the scheme are produced by burning fossil fuels, they also include emissions such as the methane released when coal is mined. The obligations include the option of surrendering carbon units for each tonne of emissions, however, if this optional step is not performed, the mandatory payment of a tax, which far exceeds the cost of a unit, is enforced. The Australian Government will sell carbon units at a fixed price for the first three years, starting at $23, after which units will be auctioned for between $15 and the expected international unit price, plus $20. The supply of domestic units will be unlimited for the three fixed price years, but will be subject to a reducing cap in following years, consistent with the Government policy of reducing Australia’s emissions. The Government has created a monopoly for the supply of units for the first three years by prohibiting the use of overseas-sourced carbon units, and by only allowing 5% of the unit surrender requirements to be comprised of Australian generated carbon credits. Thereafter, for the first five of the flexible-charge years, only half the units can be sourced from overseas, with any apparent saving likely to be offset by the various taxes and charges applicable to the use of those units. Certain fuels will also be separately taxed. Entities, however, which acquire, manufacture or import fuels and would otherwise be entitled to a fuel tax credit, may be able to assume direct liability thus enabling them to acquire or manufacture fuel, free of the carbon tax component. Where the imposts will cause competitive disadvantage to industries that compete with entities from other countries that do not have similar imposts, some assistance is provided in the form of allocated units provided at no charge. Assistance is also available to coal-fired electricity generators, producers of liquefied natural gas, operators of gassy coal mines, and the steel industry (not discussed in this paper). This paper also explains, in detail, how liability is created, how to determine which entities are liable, the means of assigning liability to other entities, and the assistance available to various industries to help deal with the financial impact of the scheme on their operations. It also outlines the key concepts that underpin the scheme.


2018 ◽  
Vol 09 (01) ◽  
pp. 1840010 ◽  
Author(s):  
RONALD D. SANDS

This paper documents application of the Future Agricultural Resources Model (FARM) to stylized carbon tax scenarios specified by the Stanford Energy Modeling Forum (EMF). Model results show that the method of tax revenue recycling makes a difference. Either labor-tax, or capital-tax, recycling can reduce the welfare cost of a carbon tax policy relative to lump sum recycling. Of the two tax recycling options, reducing capital taxes provides the greater reduction in welfare costs. However, carbon tax revenues decline with stringent carbon dioxide (CO2) emission targets and the availability of a negative-emissions technology such as bio-electricity with CO2 capture and storage (BECCS). As BECCS expands, net carbon tax revenues peak and decline due to an offsetting subsidy for carbon sequestration, limiting the potential for labor- or capital-tax recycling to reduce welfare costs of a climate policy.


2011 ◽  
Vol 1 (2) ◽  
pp. 233-247 ◽  
Author(s):  
Madhu Khanna ◽  
Christine L. Crago ◽  
Mairi Black

Biofuels have gained increasing attention as an alternative to fossil fuels for several reasons, one of which is their potential to reduce the greenhouse gas (GHG) emissions from the transportation sector. Recent studies have questioned the validity of claims about the potential of biofuels to reduce GHG emissions relative to the liquid fossil fuels they are replacing when emissions owing to direct (DLUC) and indirect land use changes (ILUC) that accompany biofuels are included in the life cycle GHG intensity of biofuels. Studies estimate that the GHG emissions released from ILUC could more than offset the direct GHG savings by producing biofuels and replacing liquid fossil fuels and create a ‘carbon debt’ with a long payback period. The estimates of this payback period, however, vary widely across biofuels from different feedstocks and even for a single biofuel across different modelling assumptions. In the case of corn ethanol, this payback period is found to range from 15 to 200 years. We discuss the challenges in estimating the ILUC effect of a biofuel and differences across biofuels, and its sensitivity to the assumptions and policy scenarios considered by different economic models. We also discuss the implications of ILUC for designing policies that promote biofuels and seek to reduce GHG emissions. In a first-best setting, a global carbon tax is needed to set both DLUC and ILUC emissions to their optimal levels. However, it is unclear whether unilateral GHG mitigation policies, even if they penalize the ILUC-related emissions, would increase social welfare and lead to optimal emission levels. In the absence of a global carbon tax, incentivizing sustainable land use practices through certification standards, government regulations and market-based pressures may be a viable option for reducing ILUC.


2020 ◽  
Vol 11 (4) ◽  
pp. 52
Author(s):  
Mohammed Mahdi Obaid ◽  
Noraza Mat Udin

Tax revenue is an important source of income for various governments around the world. However, challenges, as a result of corruption and tax noncompliance behaviour among the taxpayers, are hindering the adequate generation of such revenues for the government. The objective of this study is to investigate the effect of corruption and other tax noncompliance variables on tax revenue generation in Yemen. The study used survey research design via a questionnaire to collect data from 264 individual taxpayers in the Hadhramout Governorate. The collected data was analyzed using SPSS to perform reliability test, descriptive statistics, multicollinearity test, and regression analysis. The findings of the study show that corruption and tax rate are positively related to tax noncompliance; income level is negatively related to tax noncompliance; whereas penalty rate and education level are positive but not related to tax noncompliance. The implication of the study is that the government and the tax authority should update and institute new tax laws and policies that could minimize corruption among their officials and create more awareness among the taxpayers on the importance of paying tax to the government, so as to increase their compliance behaviour.


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