Final Report Summary - COMETR (Competiveness effects of environmental tax reforms) The purpose of the COMETR project has been to study the impacts of environmental tax reforms (ETR) on competitiveness using a range of approaches and research techniques. As a stepping stone in this aim, the COMETR project has built a unique database of sector-specific energy prices and taxes for a range of energy-intensive industries. Basically, four different research approaches have been employed to investigate the competitiveness impacts of ETR: - indicators of changes in unit energy costs as a result of ETR; - bottom-up analysis of energy cost changes relative to changes in competitiveness; - macro-economic modelling in an ex-post perspective by means of the E3ME model; - case studies and interviews in energy-intensive industries. Seven EU Member States have implemented tax reforms which to some extent shift the tax burden from taxation of labour to taxation of carbon-energy. The reforms include tax shifts toward energy and transport taxes, as well as in some cases a restructuring of energy taxes to reflect better their carbon emissions. While the scale of the tax shifts differs between member states, altogether these tax reforms are assessed to have shifted tax revenues for more than EUR 25 billion annually in Europe. It is mainly labour which has experienced the lighter tax burden. While the resulting reductions in carbon emissions are documented in several studies, concerns remain as to whether the broader effects for economic growth, competitiveness and employment are also beneficial. The COMETR project has addressed this difficult and sensitive issue by means of a range of methods and research techniques. COMETR has taken its point of departure in official definitions of competitiveness as established by the EU and OECD. The aim of the COMETR project has been to provide an evaluation from an ex-post perspective on the impacts of ETR on competitiveness, in particular that of energy-intensive industries. ETR changes the relative costs of the products produced by all companies and in particular by energy-intensive companies - and the taxation debate has been followed by speculations concerning the extent to which energy-intensive industries can either reduce their energy consumption or switch the fuel input to less carbon-intensive sources. While many energy-intensive industries maintain that they have already minimised their fossil fuel use to an efficient level, proponents of ETR cite studies and claim that further energy savings can be attained, in particular in response to energy taxation. The project has been structured into six work packages (WPs), as follows:- WP1: Environmental tax reforms in Europe- WP2: The market: structure and sector vulnerability- WP3: An assessment of the impacts of ETR on the competitiveness of selected industrial sectors - WP4: The effects of ETR on competitiveness: modelling with E3ME - WP5: Carbon leakage - WP6: Stabilisation, mitigation and compensation. COMETR aimed at and finally achieved:- to outline and clarify the competitiveness debate; - to review the experience in environmental tax reforms in EU Member States, with particular emphasis on carbon-energy taxation; - to analyse world-market conditions for a set of energy-intensive sectors or subsectors, as a framework for considering competitiveness effects; - to undertake bottom-up modelling of the effects of environmental tax reforms on sector-specific energy usage and carbon emissions in Member States with carbon-energy taxes introduced on industry (Denmark, Finland, Germany, Netherlands, Slovenia, Sweden and the United Kingdom); - to undertake a macro-economic analysis of the competitiveness effects of green tax reforms for individual Member States as well as for the EU as a whole on basis of the E3ME model of Cambridge Econometrics; - to provide ex-post figures for environmental decoupling and assess carbon leakage on basis of a comprehensive analysis, taking changes in import-export ratios into account; - to review mitigation experiences and provide policy advice on possible strategies to improve efficient mitigation measures. Related documents Final Report - COMETR (Competiveness effects of environmental tax reforms)
