Six out of 10 most competitive nations price their carbon emissions

Published 17:26 on October 1, 2015  /  Last updated at 21:02 on October 4, 2015  /  Americas, Asia Pacific, Australia, Canada, Carbon Taxes, China, Climate Talks, EMEA, EU ETS, International, Japan, Middle East, New Zealand, Other APAC, South Korea, Switzerland, US  /  No Comments

Six out of the top 10 most competitive nations, according to the World Economic Forum’s latest rankings, have introduced carbon pricing to cover some of their largest sources of carbon emissions, undermining claims that greenhouse gas abatement and rising productivity are mutually exclusive.

Six out of the top 10 most competitive nations, according to the World Economic Forum’s latest rankings, have introduced carbon pricing to cover some of their largest sources of carbon emissions, undermining claims that greenhouse gas abatement and rising productivity are mutually exclusive.

Below is a summary of carbon pricing measures that have been implemented by the 10 most competitive countries as ranked in the WEF Global Competitiveness Index (GCI), which was published on Wednesday.

The WEF defines competitiveness as “the set of institutions, policies and factors that determine the level of productivity of an economy, which in turn sets the level of prosperity that the country can achieve.”

“The report analyses competitiveness along 12 pillars: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation. These are, in turn, organized into three sub-indices in line with three main stages of development: basic requirements, efficiency enhancers, and innovation and sophistication factors. The three sub-indices are given different weights in the calculation of the overall index, depending on each economy’s stage of development, as proxied by its GDP per capita and share of exports represented by mineral raw materials.”

Also reported below are the countries’ GCI rankings in 2005, the year the EU introduced its Emissions Trading Scheme (EU ETS) for its then 27 member states. This is to show how their competitiveness has changed over the past 10 years – the timeframe during which most countries that now have a price on carbon implemented their policies.

#1 – Switzerland has its a carbon tax on thermal fuels (currently CHF60/tCO2e) and an emissions trading scheme that, as of Feb. 2015, featured emissions allowance prices of CHF12/t. Both regimes cover a total of around 38% of the country’s GHG emissions, according to the World Bank’s State and Trends of Carbon Pricing 2015 report. Switzerland redistributes about two thirds of its annual carbon tax revenue of about CHF800 million ($831 million) to businesses and the public, with the remaining third going to an energy refurbishment fund for buildings and a low-carbon technology fund. The revenues do not feed into the federal budget. (2005 ranking: #4)

#2 – Singapore has no current carbon pricing policy beyond a rebate scheme for low-carbon vehicles, but it has pledged to cut its carbon intensity (CO2e/unit of GDP) by 36% below 2005 levels by 2030. The island city-state said it intends to achieve that target domestic efforts, but will continue to study the potential of international carbon market mechanisms. (2005 ranking: #5)

#3 – The US has no national carbon pricing mechanism, but California and a group of nine north-eastern US states have emissions trading schemes. California’s market has been around since 2013 and covers roughly 85% of the state’s emissions. Allowance prices there have hovered around $12-13/tonne over the past two years. RGGI covers the nine north-eastern states’ power sector, which is equivalent to around 21% of the regional economy. RGGI allowance prices are currently valued at over $6 per short ton having averaged well below that since the scheme’s launch in 2009. No US states currently tax carbon, but many are considering it and trading as options to comply with the Clean Power Plan. Some states have low-carbon fuel standards. According to the New York-based Carbon Tax Center, Boulder, Colorado brought in a $7/ton CO2 tax on electricity in 2007, which was raised by approximately 80% in 2009. The cost per average household is estimated at less than $2.50/month. (2005 ranking: #1)

#4 – Germany is Europe’s largest economy and biggest emitter, and has been regulated by the EU ETS since 2005. The scheme covers the EU’s largest emitters and more than 40% of the bloc’s total emissions, and prices for carbon allowances under the scheme have ranged between €3 and €8 for most of the past five years. Germany does not currently have a carbon tax in place. (2005 ranking: #6)

#5 – The Netherlands is also a participant in the EU ETS. It also does not currently have a carbon tax in place. (2005 ranking: #11)

#6 – Japan currently has a national carbon tax on fossil fuels equivalent to $2/tonne of CO2e. It is being increased incrementally to $3.70 by 2016, which is estimated to cost an average household $1.30/month by then. The country in 2009 started to design a nationwide ETS, but the plan was scrapped a year later amid inter-ministerial and industry opposition. However, Japan’s environment minister this week said the country may revisit the idea. The cities of Tokyo, Kyoto and Saitama have small emissions trading schemes in place. (2005 ranking: #10)

#7 – Hong Kong has no carbon pricing mechanism in place. (2005 ranking: #14)

#8 – Finland is a participant in the EU ETS. It also introduced a national carbon tax back in 1990, making it one of the first countries to put a price on GHGs. “While originally based only on carbon content, Finland’s carbon tax was subsequently changed to a combination carbon/energy tax. It initially covered only heat and electricity production but was later expanded to cover transportation and heating fuels,” according to the World Bank. The tax currently stands at around $64/tonne for transport fuels and $48/tonne for heating fuels. (2005 ranking: #2)

#9 – Sweden is a participant in the EU ETS. The country also has a national carbon tax, which was introduced as part of energy sector reforms in 1991. Priced at around $130/tCO2 – the highest level in the world – the tax covers most fossil fuel consumption by sectors that are not regulated under the EU ETS. (2005 ranking: #7)

#10 – The United Kingdom is a participant in the EU ETS. In addition to EU carbon costs, the government has introduced a carbon price floor for utilities, which has since 2013 risen from £7 to £18 per tonne.  The UK also has other “green” charges including the Climate Change Levy and the Carbon Reduction Commitment Energy Efficiency Scheme. (2005 ranking: #9)

Thirteen of the countries rounding out the GCI’s top 30 also have carbon pricing mechanisms in place.  Below is a summary of the #11 to #30 rankings, briefly noting whether or not they have national or sub-national CO2 pricing policies:

  1. Norway – Y
  2. Denmark – Y
  3. Canada – Y
  4. Qatar – N
  5. Taiwan – N
  6. New Zealand – Y
  7. UAE – N
  8. Malaysia – N
  9. Belgium – Y
  10. Luxembourg – Y
  11. Australia – N
  12. France – Y
  13. Austria – Y
  14. Ireland – Y
  15. Saudi Arabia – N
  16. South Korea – Y
  17. Israel – N
  18. China – Y
  19. Iceland – Y
  20. Estonia – Y

 

By Mike Szabo – mike@carbon-pulse.com

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