Environmental tax on products and services based on their carbon footprint: A case study of the pulp and paper sector

Abstract

The main aim of this work is to define an environmental tax on products and services based on their carbon footprint. We examine the relevance of conventional life cycle analysis (LCA) and environmentally extended input-output analysis (EIO) as methodological tools to identify emission intensities of products and services on which the tax is based. The short-term price effects of the tax and the policy implications of considering non-GHG are also analyzed. The results from the specific case study on pulp production show that the environmental tax rate based on the LCA approach (1,8%) is higher than both EIO approaches (0,8% for product and 1,4% for industry approach), but they are comparable. Even though LCA is more product specific and provides detailed analysis, EIO would be the more relevant approach to apply economy wide environmental tax. When the environmental tax considers non-GHG emissions instead of only CO 2 , sectors 2 such as agriculture, mining of coal and extraction of peat, and food exhibit higher environmental tax and price effects. Therefore, it is worthwhile for policy makers to pay attention on the implication of considering only CO 2 tax or GHG emissions tax in order for such a policy measure to be effective and meaningful.

Carbon Footprint Estimation in the Agriculture Sector

“…Carbon footprints of different fuels are calculated to decide about the import of nonconventional vehicular fuels in California (Courchene and Allan 2008). Gemechu et al (2012) also advocated the application of carbon tax based on product carbon footprinting for kraft pulp production, in which energy usage was the most polluting sector with nearly 0.32 kg CO 2 -e kg -1 of pulp produced. Among services, aviation has been identified among the highest GHG emitters; hence, the carbon footprinting of airlines is ongoing, covering different aspects such as aircraft types, load factors, and seat configurations (Miyoshi and Mason 2009).…”

Food miles, carbon footprint and global value chains for Spanish agriculture: assessing the impact of a carbon border tax

“…From the perspective of taxing carbon from production and consumption, this finding relates to the literature on Pigouvian taxes to internalize the externalities from CO 2 emissions (see Edjabou and Smed, 2013, for an example of a carbon tax on food products to be paid on the consumer's end and Mongelli et al, 2009, for an analysis of a carbon tax on 59 sectors of the Italian economy). The effects of a producer's tax on the products from a particular industry on the rest of the industries may also be analyzed, as in Skelton and Allwood (2013) for steel or in Gemechu et al (2012) for paper. When considering international trade and commitments of the type of Kyoto protocol, carbon taxes have been suggested as a potential measure to both mitigate global emissions and prevent the potential carbon leakage from countries committed to reducing emissions to countries with no restrictions.…”

The impacts of rising energy prices on non-energy sectors in Australia

“…His results suggest that as a result of rising energy prices, there will be a reduction in the output of energy-intensive industries which in turn can affect the cost of production in other downstream industries. There is a growing interest in the use of IO price models by many analysts to evaluate the economic and environmental impacts of a diverse range of energy related policies (BernersLee et al, 2011;Gemechu et al, 2012).…”

“…After incorporating direct emissions per unit of output and the CPI data into IO tables, they measured SMEs' bespoke carbon footprint through imposing shocks which influenced the sectoral final demand while the Leontief technological matrix remains constant. Gemechu et al (2012) examined the price effects of not only on the key macro variables but also on value added in specific sectors of the economy. One should recognise that by using an IO table, the supply side is not neglected because both intermediate and final demand components encompass the demand for capital goods and other necessary factors of production (Klein, 1965, p. 323).…”