The Eighth Annual Global Conference on Environmental Taxation
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Workshop 5: International issues - Cross-Sectoral Questions

Climate Change and Sectors: Some Like it Hot!

Eric Heymann, Deutsche Bank Research

Two dimensions of climate change. Climate change does not just have an environmental-climatic dimension but also a regula-tory-market economy dimension. The latter includes government measures that are supposed to tackle climate change and its negative consequences. This dimension will affect most sectors much earlier than the climate dimension itself.
The energy industry is a particular policy focus. Without doubt, renewable energy sources will be amongst the winners from climate change, as they will continue to gain from climate-policy-motivated subsidies in the next few years. In contrast, gov-ernment measures will tend to make fossil fuels more expensive. Research and development of new and more efficient energy technologies will play a leading role in the future.
Climate effects already noticeable in agriculture and forestry. Prices for agricultural products could rise due to the increased demand for biofuels. Competition between food production and biofuels is anticipated. In higher latitudes (e.g. Scandinavia) in-creasing harvests are likely. In countries with increasing water shortages (e.g. Spain) conditions are worsening. Agricultural irri-gation and genetic technology will gain in importance – and will lead to higher costs.
The construction industry can profit in the long term. There is enormous potential for the construction industry and related sectors in the energy-related refurbishment of existing buildings. Repairing the damage from extreme weather events can trigger temporary and regional special business activities.
Major potential for industrial sectors. Many industrial sectors could contribute to tackling climate change and its negative consequences. These include mechanical engineering (e.g. air-conditioning, heating and ventilation engineering, irrigation tech-nology) and electrical engineering (e.g. energy control equipment, energy-efficient household appliances). They have enormous growth opportunities and are therefore amongst the winners from climate change. Major sectors like the chemical industry could also benefit. Even more jobs will be created in the booming environmental technology sector. The car industry faces major chal-lenges but has an opportunity for international success with energy-efficient vehicles.
Shift of demand in the services sector. In the services sector there will be heavier government burdens on the transport indus-try. The tourism business will have to deal with considerable regional and seasonal variations in tourist flows. In the financial sector the assessment of risks will be more difficult, although wide-ranging new business options (e.g. sustainable investments) will be opened up.



Reform of environmentally harmful subsidies: a role for the WTO?
The case of fisheries subsidies

Anja von Moltke, Trade & Economics, UNEP

All around the world, the growth and liberalization of international trade is changing the way we live and work. At $11 trillion a year, trade flows and the rules that govern them are a massive force for economic, environmental and social change. A growing number of developing countries look to trade and investment as a central part of their strategies for development, and trade con-siderations are increasingly important in shaping economic policy in all countries, developed as well as developing. At the same time, however, most of the world’s environmental indicators have been steadily deteriorating, and the global achievement of such important objectives as the Millennium Development Goals remains very much in doubt. It is possible that trade and in-vestment flows support the achievement of environment and development goals – but only with alignment and integration of ob-jectives governing these policies.
Fisheries subsidies reform sits at the cutting-edge of globalization, environment and trade issues. As of 2004, seventy-five per-cent of commercially exploited fish stocks worldwide are estimated to be either depleted or near-exhaustion as a result of over-fishing. This situation has the potential to create serious threats to global food security, coastal water quality and ecosystem sta-bility, gravely affecting current and future generations. Inappropriate fisheries subsidization, among other factors, has been con-cretely linked to overfishing. While the responsibility for subsidies reform ultimately lies with national governments, there is a need for international momentum to integrate global trade and environment goals in fisheries policies.
The reform of fisheries subsidies has become one of the most concrete and potentially successful international efforts to achieve environmental, economic and developmental policy coherence at the global level. The WTO certainly has to play a role. The fisheries subsidies reform debate has arguably penetrated more deeply into the policymaking process at this institution than any other environmental issue. In 2001, WTO ministers placed new fisheries subsidies disciplines on the negotiating agenda for the Doha Round. Agreement has been reached in 2005 that new WTO rules should include a ban on subsidies that contribute to overcapacity and overfishing. Much remains to be decided however. New disciplines on subsidies require clear guidance on how best to incorporate sustainability concerns. It is also important to recognise that transparency is required both in accounting for national subsidies levels and procedures at the WTO. Furthermore, assuaging fears of social and economic consequences of subsidies removal policies is key for new rules to be successful in reducing overfishing.


Eco Tax, WTO Law, and a New Concept of Liberty

Prof. Felix Ekardt, University of Bremen, Germany

A policy of strong environmental taxes which enhances energy efficiency by making flying and driving etc. much more expensive is always in danger of being voted out immediately. Economic growth on a short-term basis still has absolute priority for many politicians and citizens. Therefore, it is important to ask whether within the context of general principles of western constitutional law an obligation arises to come to a more sustainable climate policy. So far, sustainability in law – from the standpoint of the opinion leaders – is more or less a non-binding idea which doesn’t really force political institutions to act in a more sustainable way. Very often, environmental taxes are even seen as something that violates economic basic rights or liberties (e.g. property) and the European and the International Trade Law. Consequently, even if some governments are willing to come to a more effective environmental taxation, this policy is always in danger.

This presentation tries to turn the perspective: Maybe the governments are neither forbidden nor entitled, but obliged to force the internalization of external costs, e.g. by establishing eco taxes. Maybe it is not a strong environmental policy which poses the real danger for European and international freedom of trade, but the externalization of costs that can be seen in the absence of strong environmental rules in many countries. Therefore, on the one hand it might be helpful (1) to give a new interpretation of the norms which prohibit all kinds of subsidies and trade restriction in European and International Law. On the other hand (2), it is necessary to introduce a new concept of (sustainable) liberty in general. Liberty is the basic concept within the framework of human rights – and human rights are the strongest element of liberal democratic constitutions, on a national as well as on a transnational level (much stronger than objective norms like Article 174 in European constitutional law). A reinterpretation of liberty in western constitutions overcomes the traditional “economy-centred” concept of liberty. That might mean (a) that the rights of liberty also include the basic physical conditions of liberty (including a stable basis of resources and accordant climate). Furthermore, maybe even (b) people of the southern hemisphere and (c) people of future generations have some rights that oblige Western states by law to come to a new policy as regards eco taxes. In addition, liberty (d) maybe includes the polluter pays principle as an enforceable rule.

Border Tax Adjustments and WTO Law

Dr. Roland Ismer, Ludwig Maximilian University, Munich, Germany

CO2 emission allowances help to internalise effects of fossil fuel consumption on global climate and sea levels. However, consumption, production and investment decisions do not reach the optimal allocation when the scheme is only implemented in some countries. Production with inefficient facilities in non-participating countries may even increase. Border tax adjustment for costs incurred from procuring CO2 emission allowances reduces the leakage. We show that border tax adjustment (BTA) can be both feasible and compatible with WTO constraints. Practicable implementability requires a focus on CO2 emissions from certain processed materials and a separate treatment of electric energy input.



Fiscal Instruments for biodiversity protection in Latin American countries

Prof. Jose Juan González Márquez, Prof. Ivett Montelongo Buenavista, Universidad Autónoma Metropolitana, México

This paper has the objective of analysing the main trends that taxation presents in Latin American countries in using this instrument as tool to complement command and control based approached environmental policies.

The study mainly covers the most developed countries such as Mexico, Brazil and Chile. The analysis will focus on the use of environmental taxes, fiscal stimuli and charges that had been incorporated into the traditional categories of taxation in such countries.

On the other hand, our work will analyse the connection that needs to be established between environmental taxation and other economic instruments to integrate a comprehensive environmental policy where economic instruments acts as a real complement of the command and control based approach environmental policies.

Since that analysis we will discus about the possibilities of introducing environmental taxes with the idea not only of protecting biodiversity but also to made effective the polluter payers principle and in this way to produce a favourable effect on poverty reduction.

In this way, the study of the main effects that the incorporation of taxation has had in biodiversity protection and in promoting sustainable uses of such biodiversity will be also analysed.

Finally, we will point out some conclusions and recommendations based on the analysis of the mentioned results.


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