اثرات اقتصادی و زیست محیطی از مالیات بر کربن برای اسکاتلند: تجزیه و تحلیل تعادل عمومی

Using a disaggregated energy–economy–environmental model, we investigate the economic and environmental impact of a Scottish specific carbon tax under three alternative assumptions about the use of the revenue raised by the tax: revenues raised are not recycled within Scotland; revenues are used to increase general government expenditure or to reduce Scottish income tax. We find that by imposing a tax of £50 per tonne of CO2 the 37% CO2 reduction target is met with a very rapid adjustment in all three cases if the model incorporates forward-looking behaviour. However, the adjustment is much slower if agents are myopic. In addition, the results of the model suggest that a carbon tax might simultaneously stimulate economic activity whilst reducing emissions and thus secure a double dividend, but only for the case in which the revenue is recycled through income tax.

Since devolution, the Scottish Government has increasingly adopted a distinctive environmental and energy policy (Allan et al., 2008). The Climate Change (Scotland) Act includes a target to reduce CO2 emissions to 42% below in 1990 levels by 2020. This is stricter than the 34% CO2 emissions reduction adopted by the UK Government. Moreover, the corresponding Scottish Government target for renewable electricity generation in 2020 is equivalent to 100% of electricity consumption in Scotland and preliminary data suggest that the interim 2011 target of 31% was exceeded by 4 percentage points. However, earlier discussions have established that whilst Scotland has adopted challenging targets, many key policy instruments are reserved to the UK government (Allan et al., 2008; McGregor et al., 2013). At present the main “green” elements of the tax system remain under Westminster control. This includes fuel duties, air passenger duty and the climate change levy. Also reserved to the UK Government are: the tax-transfer system; powers over the structure and regulation of the electricity market; Renewable Obligation Certificates, the Renewable Transport Fuel Obligation and the Renewable Heat Incentive; Climate Change Agreements; and the Carbon Reduction Commitment. The Scottish Government has succeeded in making Scottish energy policy more distinctive, first through setting different targets (as described above) and second by developing specific policies within the non-reserved powers at their discretion. These powers include the judicious use of the planning system and additional funding for alternative renewable technologies in pre-commercial scales, such as the Wave and Tidal Energy Scheme (WATES), the Saltire Prize, and the Scottish Community and Household Renewable Initiative. Nevertheless, the Committee on Climate Change report into Scottish emission targets concluded that with current policies, and assuming the current cap on emissions under the EU ETS, the Scottish Government's target of a 42% reduction will be missed, with emissions only falling by 38% in 1990 levels. Economists typically regard a carbon tax as the most efficient way to reduce carbon emissions (Pearce, 1991 and Tullock, 1967). Furthermore, continuing pressure for greater fiscal autonomy is likely to expand the range of climate change policies that the Scottish Government has at its disposal (McGregor and Swales, 2013). It is therefore of interest to consider the effect of a Scottish specific carbon tax. This is particularly relevant given the more demanding environmental targets set by the Scottish Government and the present discussions around increased fiscal autonomy for Scotland. The Scotland Act (2012) has augmented the income tax raising power of the Scottish Parliament, so that it will have the power to make a balanced-budget adjustment in public expenditure funded by corresponding changes in the basic as well as higher rates of income tax of up to 10 p in the pound.1 In this paper we employ an empirical energy–economy–environmental model2 of Scotland to simulate the impact of a Scottish specific carbon tax on the levels of carbon emissions and of aggregate and sectoral economic activity. The simulations are conducted under alternative assumptions about the use of the revenues raised by the tax, for example, to increase general Government expenditure or to reduce the rate of income tax. The remainder of the paper is organised as follows. Section 2 outlines the arguments for a carbon tax and introduces the notion of the double dividend. Section 3 summarises the key features of the model. Section 4 briefly describes the model parameterization and discusses the simulation set up. Section 5 discusses the simulation results. In Section 6 we provide a sensitivity analysis and in Section 7 we present brief conclusions.

There is no doubt about the level of ambition of the Scottish Government's emission targets, but there must be some doubt about whether it has sufficient policy instruments under its direct control to induce households and firms to behave in a way that ensures these targets are met. Yet this is the challenge that the Scottish Government faces in the context of liberalized energy markets. Whilst credibility is enhanced by enshrining emission targets in a legal framework, this is generally insufficient to ensure their satisfaction (McGregor et al., 2012). The debate on constitutional change continues to gain momentum in the run up to the referendum on independence, scheduled for late 2014. However, regardless of the outcome, the Scottish Government is destined to benefit from a significant enhancement in the extent of its fiscal powers. Against this background, it seems natural to consider the possibility of a Scottish-specific carbon tax. It seems natural because this could be a genuine option under both devo-max and independence. Such a tax is focused on the “bad” of emissions directly and, if implemented in a fiscally neutral way, offers the potential of a double dividend if the revenues are used to subsidise, or reduce the level of existing taxes on, the “good” of employment. Our simulations demonstrate that a carbon tax could simultaneously stimulate employment whilst reducing emissions and secure a double dividend. In our analysis we have shown that the imposition of a carbon tax generates adverse supply effects due to increase in prices when the revenue collected is recycled outwith the region. (In this case, the Scottish Government does not have control revenues and cannot recycle the revenue generated by the tax within the Scottish economy.) The negative economic effects on economic activity and employment are exacerbated by a fall in competitiveness so that the demand for Scottish goods and services also falls. This also produces corresponding negative indirect effects on investment and household consumption. However, when the total tax revenue is recycled internally some offsetting effects occur. We consider two possible uses of the enhanced revenues: to stimulate an increase in current government expenditure, or to reduce the rate of income tax. In both cases the total tax-take is the same and it corresponds, in our base year, to £1662 million at 2000 prices. With revenue recycled through public expenditure, the positive expenditure stimulus is not able to fully offset the negative supply side effects of the increase in energy taxation. For the case in which the revenue is recycled through income tax there is a net positive impact on the economy. We plan more extensive systematic analysis of the factors that govern both the direction and the scale of the Scottish economy's response to a carbon tax. In particular, we shall investigate the impact of a Scottish carbon tax in circumstances where there are the supply-side effects of public expenditure. Furthermore, the likely impact on the Scottish economy and emissions of climate change policies pursued in the rest-of-the UK, the rest of the EU and the rest of the World is also potentially crucial (Adams and Parmenter, 2013). We conclude by noting that the estimates that we present here are by no means an upper bound for the potential beneficial impacts of a carbon tax: in the longer term, we would expect the tax to stimulate innovation in low-carbon technologies, a positive effect that is absent from our current analysis. Furthermore, in current circumstances, it may be thought desirable to seek and to focus the beneficial impacts more carefully, for example by recycling revenues to subsidise employment among the younger age groups who have been most adversely impacted by the recession and its aftermath. The results that we report here are sufficiently promising to merit more extensive analysis of the likely economic and environmental impacts of a Scottish carbon tax.