Gr Gree een Fi Fiscal l Reform to o Promot ote Cir Circul - PowerPoint PPT Presentation

Gr Gree een Fi Fiscal l Reform to o Promot ote Cir Circul ular r Econ onom omy – Pot otentia ial l Ne New Tax Op Opti tions in n Fi Finl nland Sarianne Tikkanen Panel Session on Best Practices and Policy Requirements to Achieve Circular Economy Objectives WCERE 2018 - Gothenburg, Sweden 27th June 2018

Bes Best t Practi tices and nd Fi Fiscal l Reform for or a a Cir Circula lar Economy in n Fi Finland -pr project Funded by Sitra - the Finnish Innovation Fund Consortium: Green Budget Europe GBE (head of consortium) - Eero Yrjö-Koskinen & Sarianne Tikkanen Ex’tax – project - Femke Groothuis, Valérie-Isabelle van de Luitgaarden & Peter Gersen Institute for European Environmental Policy IEEP - Emma Watkins & Jean-Pierre Schweitzer Cambridge Econometrics - E3ME macroeconomic model 27th June 2018 S ARIANNE T IKKANEN - GBE 2

Go Goal an and focu ocus of of the he pr project Main goal of the project - to boost implementation of the Finnish national roadmap to a circular economy in practice. Two tasks of the project 1) Identify economic instruments and best practices to promote circular economy goals 2) Present an ambitious scenario of green fiscal reform that aligns fiscal policy with a carbon neutral circular economy o identify new tax options for a fiscal reform o assess impacts of the fiscal reform by modelling S ARIANNE T IKKANEN - GBE 27th June 2018 3

En Envir ironment and nd Res esource Taxes in n Fi Finland 27 June 2018 G REEN B UDGET E UROPE 4

En Envir ironmental tax bases in n Fi Finland Energy and Carbon taxation - from 1990: now EUR 62/tonne of carbon dioxide for all fuels - not effective rate because of the tax reliefs and reductions Transport taxes according to CO 2 emissions - Car tax (registration tax) - Annual vehicle tax Waste Related Taxes - Landfill tax, EUR 70/tonne of waste - Tax on certain beverage containers + deposit-refund scheme = very effective instrument mix No resource taxes, only minor fees - Hunting and Fishing Fees 27th June 2018 S ARIANNE T IKKANEN - GBE 5

ironmental t ax En Envir ax revenues - € 6.1 bi billio ion 2015 - 7 7 % % of total al tax ax reven enue ues (20 2015) 15) - 3.1 1 % of GD GDP 27th June 2018 S ARIANNE T IKKANEN - GBE 6

Shar Share of of revenues by by en environmental tax base bases 27th June 2018 S ARIANNE T IKKANEN - GBE

Tax shif hift fr from om labo abour r taxation to o ener energy taxes Tax shifts from labour to environmental taxation has been taken place in several times and nearly in every budget. Years 1996 - 1998 Labour tax cutting • Energy tax increase • Introduction of waste tax • Years 2008 – 2011 Green tax reform Labour tax cutting by removal of employers social security contributions • Energy tax increases • During 4 years labour tax cutting altogether about € 2 billion • State budget 2018 • Labour tax cutting by over € 300 million • Compensation by increases of o energy tax for heating € 52 million o tax for alchohol and tobacco 27th June 2018 S ARIANNE T IKKANEN - GBE 8

Lab abour taxation is is still ill hi high in in Fin Finland - over half half of of all all tax and and tax-like revenues

Nee eed for or cha changes in in the he tax stru ructure - Optio ions for or ne new tax ax bas bases

Ci Circular eco economy goals oals and and fi fiscal ins nstruments 1. Minimizing the use of virgin natural resources  Resource taxes  Pricing of CO 2 emissions 2. Prolonging the lifetime of products  Cutting labour taxes to boost service based business models  Incentives for research and development 3. Recycling of waste as material  Waste related taxes 11 June 14, 2018 EX ’ TAX , GBE , IEEP

Na Natu tural reso esource tax op opti tions: : mine neral extraction on  Mining tax for metal minerals  Mining tax for industrial minerals  Aggregates tax  Sand, gravel and crushed rock Rationale  Closing loop on material recycling  Internalizing environmental costs of mineral extraction  Reducing environmental risks to groundwater Example EU  Sweden: EUR 1.2 per tonne of natural gravel  UK: EUR 2.48 per tonne of sand, gravel and rock 12 June 14, 2018 EX ’ TAX , GBE , IEEP

Tax op opti tion for or use use of of water  Water abstraction or water use tax Rationale  Closing loop on water  Driving efficiencies  Saving energy Many examples in EU  Denmark  Netherlands  Germany  Belgium  Poland  Italy 13 June 14, 2018 EX ’ TAX , GBE , IEEP

Agricult Ag lture rela elated tax op opti tions  Fertilizer tax  Apply only to mineral fertilizers  Pesticide tax Rationale  Closing loop on nutrient recycling  Internalizing cost of environmental and health risks of pesticides Example EU  Sweden: active ingredients of pesticides  Denmark: phosphorus in animal feed 14 June 14, 2018 EX ’ TAX , GBE , IEEP

Tax op opti tion for or non non-energy use use of of fos ossil fuels fuels  Tax for non-energy use of fossil fuels  Resource tax for mineral oil used in plastic, rubber, painting and other chemical industry Rationale  Closing loop on plastic material recycling and driving efficiencies  Polluter pays principles: internalizing environmental costs of plastics  Substituting fossil-based materials with recycled / renewable materials Example EU  No examples but studies and discussion in Germany and the Netherlands 15 June 14, 2018 EX ’ TAX , GBE , IEEP

Energy Ene y an and carbon tax op opti tions  Carbon price floor  Remove of energy tax subsidies  energy-intensive industry  lower electricity rate for industry, mining, data centers  diesel and light fuel oil Rationale  Phase out fossil fuel subsidies  Level playing field between fuels  Polluter pays principle Example EU  UK Carbon Floor Price (2013) to complement EU ETS EUR 20/tCO2 16 June 14, 2018 EX ’ TAX , GBE , IEEP

Transport rela lated tax op opti tions  Air passenger duty  Air freight duty Rationale  Level playing field between transport  Polluter pays principle  Phase out subsidies for fossil fuels used in planes Example EU  Sweden (2018) EUR 6 - 39 depending on distance 17 June 14, 2018 EX ’ TAX , GBE , IEEP

Was aste rel elated tax op opti tions  Incineration tax  Nuclear waste tax Rationale  Closing loop on material recycling  Application of EU waste hierarchy  Internalizing health risks of long lasting nuclear waste Example EU  Denmark: incineration tax EUR 35/tonne  Spain: tax on nuclear waste EUR 6.6 – 7.8/MWh 18 June 14, 2018 EX ’ TAX , GBE , IEEP

Lab Labour tax red eductio ion op opti tions  Personal income tax reduction  Social security contributions reductions  Payroll tax credit for new employment  Payroll tax credit for circular economy services and innovations Rationale  Finland has a high tax wedge for labour  Boost labour-intensive and service based circular economy business models 19 June 14, 2018 EX ’ TAX , GBE , IEEP

Coh Coherent an and sm smart mix ix of of ins nstr truments Fiscal instruments are only one part of the regulatory system - need for justification with other instruments e.g.  Renewing of business subsidies  Increasing of R&D subsidies  Extended producer responsibility  Green public procurement  Ecodesign directive  Etc. 20 June 14, 2018 EX ’ TAX , GBE , IEEP

Thank you for your attention! Th Thank you ou for your attention! SARIANNE TIKKANEN Project manager Green Budget Europe HELSINKI Tel. +358 50 594 5267 Sarianne.Tikkanen@ green-budget.eu Green Budget Europe www.green-budget.eu @greenbudget_EU @greenbudgetEU Photos used in the presentation are my own or from pixabay. 27th June 2018 S ARIANNE T IKKANEN - GBE 21