Tax aspects of tradable emission permits

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Tax aspects of tradable emission permits

• Stockholm conference June 15, 2009

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Tax aspects of tradable emission permits
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Tax aspects of tradable emission permits

• The focus of the session will be tax issues posed
  by tradable emission permits, the merits of trade
  and cap vs. carbon taxes is not a focus
• The aim of the session is to address how tax
  obstacles can be avoided or removed to facilitate
  the efficient operation of the market in tradable
  emission permits how can we design an efficient
  tax system for emission trading permits?
• In doing this we have to bridge audiences which
  come to this subject from an environmental and
  tax background this may be a challenge
• This is a new challenge with global implications
  and a short timescale to solve!
• In addition to emission trading credits, what
  should be the tax treatment of measures and
  investments to abate emissions?

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Tax aspects of tradable emission permits

• The format of the session is
• Mathew Haskins (PwC) will focus on the experience
  from existing systems and consider the
  interaction of final users of permits and owners
  who hold permits as financial instruments. He
  will also comment on the current position in the
  US
• Monique van Herksen (Baker McKenzie) will
  consider the transfer pricing issues
• An Theeuwes (Shell) will provide a perspective
  from business
• Rolf Diemer will outline the Commissions views
  and
• Hugh Ault will describe the status of the OECD
  project on the subject
• I will then open up the session for a wider
  discussion

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Tax aspects of tradable emission permits

• Business has to prepare for the auctioning of
  emission permits phased in over a period of time
  running to 2020 in Europe, there are parallel
  processes elsewhere
• With 100 auctioning of permits, a group with
  emissions of 50m tonnes will face a cost of 1bn
  euro/annum at 20 Euro /tonne carbon cost
• This cost and the ancillary potential tax
  friction costs of acquiring and using permits
  will be significant issues for business and
  consumers. These issues will be magnified if MNCs
  have to deal with a multitude of regimes
• In terms of design of the tax treatment of
  tradable emission permits within the EC, avoiding
  friction costs (sticking taxes) is a key issue in
  producing an emission trading system which
  achieves its stated aim in the most economically
  efficient manner while preserving the competitive
  position of European business in a global context
  .

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Tax aspects of tradable emission permits

• Business Europes perspective Green Tax Group
  formed January 2008
• OECD project
• Australian emission trading scheme
• US initiatives
• Emission permits vs. carbon taxes
• Corporate income tax
• VAT
• Withholding tax
• Transfer Pricing

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Tax aspects of tradable emission permits

• Should tradable emission permits be taxed within
  the normal tax regimes, should they be subject to
  a special regime or should they be exempt from
  tax?
• Is some sort of harmonisation of treatment within
  the EC merited to avoid tax friction costs and an
  internal market?
• Do we need common standards globally to avoid
  friction costs?
• Should we be concerned at different tax
  treatments around the world? See Emission
  Trading Tax in EU PwC 20.04.06
• What should be the tax treatment of abatement
  costs?

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Tax aspects of tradable emission permits

• End of presentation