Influences on International Competitiveness and CO₂ Emissions Reduction due to the Environmental Tax Reduction and Exemption for Energy-Intensive Industries

Abstract

Although environmental taxes to mitigate CO₂ emissions are planned or introduced domestically and internationally in recent years, those on energy-intensive industries are reduced and exempted in many tax systems to maintain international competitiveness of the industries. This paper aims to analyze whether the environmental tax seriously influences on international competitiveness of energy-intensive industries, whether the tax reduction and exemption for the industries can mitigate the influences, and how such measures influence on CO₂ emissions reduction. The influences on the international competitiveness and CO₂ emissions reduction were evaluated by comparing the case to impose the uniform-rate environmental tax and the cases to reduce and exempt the tax on energy-intensive industries. GTAP-Ex model, the applied general equilibrium model expanded GTAP-E model, was used for the simulation analyses. Consequently, the influences on energy-intensive industries due to the environmental tax were small. Also, though improvement of international competitiveness by the tax reduction and exemption was small, CO₂ emissions reduction rates and efficiency were lowered. Then, it is concluded that the environmental tax reduction and exemption should not be implemented needlessly, and the influences on individual energy-intensive industries, non-energy-intensive industries, and CO₂ emissions reduction should be considered totally if the measures are implemented.