The Constitutional Council has vetoed yesterday the proposed carbon tax to come into force on 1 January 2010, which is tomorrow. The text of the decision is here. The main reason, I feel totally fair, which is invoked is that the numerous exemptions and concessions which may be the contribution (including motor carriers reimbursed at 35% which is still pretty amazing from my point of view, etc.) do not share a principle of tax equality, and on the other hand, does not contribute to the effectiveness of this tax. If I totally agree with the first phase of trial, I rest a bit before the ruling on cirsconspect efficiency. It is true that if a large share of emissions is exempted from this contribution (cf, Article 82 of the decision "93% of carbon dioxide emissions from industrial sources, excluding fuel, will be totally exempt from carbon tax, that the activities subject to the carbon tax will represent less than half of all emissions of greenhouse gases, the carbon contribution will focus on fuel and heating products that are only one source of carbon dioxide emission "), the reduction target displayed by the government as justification for the implementation thereof is a bit ridiculous.
What I have a little problem is how the Constitutional Council which partly justifies problem efficiency in Article 82 of its decision. quote almost entirely so that everything is clear:
82. Whereas reductions carbon contribution rate or rates may be justified by the pursuit of general interest, such as safeguarding the competitiveness of economic sectors exposed to international competition, the total exemption of the levy may be justified if the economic sectors in question are specifically called upon by a particular device; that in this case, if certain companies exempted from paying the carbon tax system are subject to trading gas emission greenhouse emissions in the EU, it is undisputed that these quotas are currently allocated free of charge and pay the quota will enter into force in 2013 and this gradually until 2027 ; "
is where I have a problem: CC based on the fact that some large companies get allowances for free on the CO2 market in Europe, and therefore would not have to registration at the carbon tax, which would be a loophole in environmental taxation around the effect emissions for them.
That seems to be a nonsense of an economic perspective. The two instruments, taxes and fees pigovienne polluter pays to pollute, allow at least a theoretical point of view of achieving the same goal, namely a sustainable emission level determined by the Government according to its commitments, tied themselves normally (I'm naive, I know !) to further the public interest. But it seems that the tax pigovienne is primarily from the viewpoint of the effectiveness of any more expensive than a quota system and on the other hand, imply that manufacturers are paying twice to achieve the same objectives, which is uneconomical!
A small example on the economic efficiency of each device may be useful, although not very general validity. I draw on a report by the Council of Economic Analysis of a few years ago on environmental taxation.
Consider two companies A and B both emit 100,000 tonnes of CO2. The total emission is 200 000 t. Suppose Company A's marginal abatement cost is 5 euros (that is to say that if it wants to reduce its emissions by one tonne, it will cost a total of EUR 5 for example by adopting technologies of cleaner production "). Similarly, suppose that for company B, the marginal cost of abatement is 15 euros per tonne.
The government's goal is to reach a level of 190 000 t annually.
two solutions: it introduces a carbon tax, or it creates a system of exchange of rights to pollute. To simplify the problem, assume that the tax applies only if the government's target is exceeded and, of course, it is perfectly capable of inventories of emissions of each company.
begin by considering the existence of an exchange of CO2, the objective being to assess how the economic cost target set by government can be achieved. If it seeks to achieve a objective 190000t annual issued amount of allowances distributed "free" must be a total of 190000t. Suppose that pollution rights are awarded fairly well for both companies is 95,000 quota each and make the assumption that the average price of the quota market is 10 € €
It cost $ 5 to A clean up per unit. If 10000t reduced its emissions, it will cost € 50,000. Moreover, it can sell the surplus quota price of 10 € or 5,000 X 10 = 50000 €. Thus, the reduction in emissions it has zero net cost.
B can acquire these 5000 t the price of 10 € which will cost 50,000 euros. But it would have cost 15 € X 5000 = € 75,000 to reduce its pollution level of 5000 t.
The cost for A is therefore 0 and for B € 50 000 €. To achieve the same overall goal of reducing emissions, it will cost € 50 000 to the community.
The government's goal is to reach a level of 190 000 t annually.
two solutions: it introduces a carbon tax, or it creates a system of exchange of rights to pollute. To simplify the problem, assume that the tax applies only if the government's target is exceeded and, of course, it is perfectly capable of inventories of emissions of each company.
begin by considering the existence of an exchange of CO2, the objective being to assess how the economic cost target set by government can be achieved. If it seeks to achieve a objective 190000t annual issued amount of allowances distributed "free" must be a total of 190000t. Suppose that pollution rights are awarded fairly well for both companies is 95,000 quota each and make the assumption that the average price of the quota market is 10 € €
It cost $ 5 to A clean up per unit. If 10000t reduced its emissions, it will cost € 50,000. Moreover, it can sell the surplus quota price of 10 € or 5,000 X 10 = 50000 €. Thus, the reduction in emissions it has zero net cost.
B can acquire these 5000 t the price of 10 € which will cost 50,000 euros. But it would have cost 15 € X 5000 = € 75,000 to reduce its pollution level of 5000 t.
The cost for A is therefore 0 and for B € 50 000 €. To achieve the same overall goal of reducing emissions, it will cost € 50 000 to the community.
Now for the tax. Suppose it is also an amount of 10 euros per ton (actually, it was normally 17 euros per tonne in the 2010 budget). The data remains unchanged but little originality, the fee is acquitted that beyond the allocated quota 950000 tonnes (Quotas are not exchangeable between the two companies). For the company that has a cost of remediation of 5 euros per tonne, it is better to clean up than pay the tax, which cost him 5 * 5000 tonnes, 25 000. For the company that has a cost of abatement of 15 euros per tonne, it is better to pay the tax, ie 10 * 5000 = € 75,000 tonnes. A total of 75,000 euros of tax revenue will be collected and this will cost the company 75,000 25,000 + € 100,000 is to achieve the same objective a priori quotas.A market is more expensive, but it would not be rational for the government to fix a fee of 10 euros per tonne, it could simply to set a value say 5 euros + epsilon to attract the company to clean up up to 5000 tons (the tax is a little more expensive than 5 euros), which always cost him 25,000 euros and the product of tax would 5000t * (5 + epsilon), or just over 25,000 euros. In total, the economic cost would be about 50,000 euros as well, like in the allowance market.
But the quota market is at least as effective as the tax, especially if one adds the cost of an administration to oversee payment and control over the tax, potentially much higher than in the case of a market quotas. It is therefore a priori more efficient (neglecting transaction costs!), wherefore also he is a tool increasingly favored.
Clearly, the argument of the Constitutional Council that participation in the quota market is not a ground for exemption from the carbon tax seems to me not only false but otherwise little resemblance to the continued interest General ...
