Getting Energy Prices Right by Ian Parry; Presented at the The … · 2016-09-08 · Rationale for...
Transcript of Getting Energy Prices Right by Ian Parry; Presented at the The … · 2016-09-08 · Rationale for...
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Ian Parry
Fiscal Affairs Department, IMF
The Energy Transition, INDCs and the Post-COP21 Agenda, Marrakech, September 8-9, 2016
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Outline
• Carbon pricing
• Broader energy price reform
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Carbon Pricing
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Rationale for Carbon Pricing
• Carbon pricing vs. regulatory approaches• Far more environmentally effective
• Raises significant revenue
• Trading systems should look like taxes• Combine with taxes for uncovered emissions (e.g.,
road, heating fuels)
• Auction allowances
• Include price ceilings and floors 4
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Design Issues: Domestic
• Administration: ideally upstream• Maximizes coverage/minimizes collection points
• Straightforward extension of fuel taxes
• Revenues: use productively• Cut other taxes or fund high-value spending
• Strong case for carbon taxes in developing countries
• Price trajectories: align with INDCs based on • Emission projections and their responsiveness 5
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Design Issues: International
• Price floors more flexible than uniform prices• Allow countries to exceed floor (for fiscal, domestic
environmental, or political acceptability reasons)
• Precedents: EU tax floors for VAT, excises
• Need to monitor broader energy taxes/subsidies (manageable)
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Prices for Paris and Revenue (Preliminary)
7Source. IMF (2016).
Argentina GHGs 15% below BAU in 2030 0.6 7 0.3Australia GHGs 26-28% below 2005 by 2030 1.3 >150 >3.5Brazil GHGs 37% below 2005 by 2025 1.5 >150 >3.1Canada GHGs 30% below 2005 by 2030 1.7 >150 >3.7China CO2/GDP 60-65% below 2005 by 2030 29.0 39 2.0France GHGs 40% below 1990 by 2030 1.0 >150 >1.5Germany GHGs 40% below 1990 by 2030 2.5 >150 >2.3India GHG/GDP 33-35% below 2005 by 2030 6.0 0 0Indonesia GHGs 29% below BAU in 2030 1.4 >150 >4.3Italy GHGs 40% below 1990 by 2030 1.1 >150 >2.2Japan GHGs 25% below 2005 by 2030 4.0 >150 >3.3Korea GHGs 37% below BAU in 2030 1.8 >150 >4.3Mexico GHGs 25% below BAU in 2030 1.5 >150 >4.3Russia GHGs 25-30% below 1990 by 2030 5.0 22 2.4S. Arabia GHGs 130 mn tons below BAU by 2030 1.5 >150 >8.9S. Africa GHGs 398-614 mn tons in 2025 and 2030 1.4 42 5.0Turkey GHGs up to 21% below BAU by 2030 0.9 93 2.8UK GHGs 40% below 1990 by 2030 1.4 >150 >1.8US GHGs 26-28% below 2005 by 2025 16.5 116 2.3
Country Mitigation pledge: Reduce…Revenue in target year, percent GDP
Required CO2
price/ton in target year, $2015
Share of global CO2,
2013
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China: Comparing Policy Effectiveness
80 5 10 15 20 25 30
Carbon Tax
Coal excise
ETS
Electricity excise
Renewable subsidy
Reducing CO2intensity: power
Energy efficiency:electricity
Road Fuel Tax
Energy efficiency:vehicles
Energy efficiency:buildings/industry
% CO2 reduction in 2030 below business as usual
Modest policy:almost meets INDC with CO2 price $35/ton
Aggressive policy:CO2 price $70/ton
INDC
Source. IMF (2016).
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China: Reductions in Air Pollution Deaths
90.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0.8
0.9
1.0
1.1
1.2
1.3
1.4
2015 2018 2021 2024 2027 2030
Cum
ulat
ive L
ives
Sav
ed (M
illio
ns)
Mill
ions
of D
eath
s per
Yea
r
Baseline
ETS
Coal tax
Carbon tax
Source. IMF (2016).
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Broader Energy Price
Reform
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Other Externalities
• (Outdoor) air pollution from fine particulates• 3.2 million deaths a year
• Requires: tax on emissions or tax on fuel with credits for downstream mitigation (e.g., SO2 scrubbers)
• Road congestion, accidents, pavement damage • London congestion $40/gal., accidents kill 1.2 million
• Requires: mileage taxes (e.g., peak period pricing)
• Fuel taxes appropriate for the interim11
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Valuing Externalities: Air Pollution
• Population exposure• Power plant loca on → number
of people in proximity
• Exposure → mortality• Evidence from GBD
• Monetize health effects• Evidence on WTP for health
• Damages per unit of fuels• Country-specific emissions factors 12
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Efficient Coal Prices, 2013
13
0.9
39.2
6.0
6.5
65.8
4.8
26.9
40.9
16.4
8.7
25.7
26.3
6.8
18.7
66.9
31.3
18.9
19.1
0 5 10 15 20 25
Argentina
Australia
Brazil
Canada
China
France
Germany
India
Indonesia
Italy
Japan
Korea
Mexico
Russia
South Africa
Turkey
UK
US
$/Gigajoule
supply cost global warming Local pollution VAT current price
share of fuelin primary energy
Source. IMF (2016).
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Efficient Natural Gas Prices, 2013
14
51.0
23.3
10.8
31.3
4.6
14.7
19.8
5.4
17.0
29.1
22.4
14.1
34.0
28.0
33.8
2.9
32.8
30.9
25.6
0 5 10 15 20 25 30
ArgentinaAustralia
BrazilCanada
ChinaFrance
GermanyIndia
IndonesiaItaly
JapanKorea
MexicoRussia
Saudi ArabiaSouth Africa
TurkeyUKUS
$/Gigajoule
supply cost global warming local pollution VAT current price
share of fuelin primary energy
Source. IMF (2016).
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Efficient Gasoline Prices, 2013
15
7.6
12.7
8.9
13.3
3.3
2.8
6.0
2.2
13.4
6.0
9.2
3.1
20.6
7.2
11.7
6.5
1.8
6.6
17.0
0.00 0.50 1.00 1.50 2.00 2.50
ArgentinaAustralia
BrazilCanada
ChinaFrance
GermanyIndia
IndonesiaItaly
JapanKorea
MexicoRussia
Saudi ArabiaSouth Africa
TurkeyUKUS
$/Liter
supply cost global warming local pollution congestionaccidents VAT current price
Source. IMF (2016).
share of fuelin primary energy
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Efficient Road Diesel Prices, 2013
16
12.0
14.0
16.3
10.8
5.8
18.9
17.6
7.8
12.7
17.3
8.5
6.6
11.1
4.6
11.0
8.0
15.7
13.1
8.1
0.00 0.50 1.00 1.50 2.00 2.50 3.00
ArgentinaAustralia
BrazilCanada
ChinaFrance
GermanyIndia
IndonesiaItaly
JapanKorea
MexicoRussia
Saudi ArabiaSouth Africa
TurkeyUKUS
$/Liter
supply cost global warming local pollution congestionaccidents road damage VAT current price
Source. IMF (2016).
share of fuelin primary energy
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Large Benefits from Reform, 2013
• Global CO2
• Reduced 21%
• Fossil fuel air pollution deaths• Reduced 55%
• Revenue gain• 4% of global GDP
• Economic welfare gain • 2% of global GDP 17
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Concluding: Moving Policy Forward
• Energy price reform largely in countries interests• Countries can move ahead unilaterally
• Time is right• Low energy prices, fiscal pressures, Paris Agreement
• Need to address domestic obstacles• Protect low income households (requires ≈10% of
revenues)
• Assist transition away from uneconomic firms18