We have a guest lecturer, Joel Wood, who talked a lot about pollution this Tuesday. And in this lecture, I got to know many different kinds of pollution aside from carbon pollution(greenhouse gas emission) we’ve been so focus on so far this term. And by doing some research, I decided to dig into sulfur tax in Denmark.
BACKGROUND/HISTORY ON DANISH GREEN TAX REFORM
In the 1990s, there were major changes in Danish tax policies and regime. In 1993 the Danish parliament adopted a green tax reform that should gradually shift taxation from labor to environment and energy during 1994-1998. The reform involved new green taxes on water, waste water and packaging as well as increased taxes on petrol, diesel, electricity, coal, waste and motor vehicles.
In total around 1% of GDP was shifted from labor taxes to green taxes with the majority of green taxes immediately burdening households. The aim was to increase the incentives to supply labor and at the same time reduce environmentally harmful behavior – that is a so-called double dividend.
- The tax will incur on the price of energy where the production is based on the use of fuels that contain sulphur, and as a result, energy consumption would decline
- The tax will change the energy price structure, thereby providing and incentive to substitute high sulphur content fuels with fuels with a lower sulphur content, as they became relatively cheaper
- The tax will provide an economic incentive for the development of new low sulfur content fuels
- The tax will promote improvement of the existing end-of-pipe cleaning equipment
Currently the charge is based on electricity output, but plans in future to charge based on the sulphur inputs thus increasing the incentive of power plants to use low-sulphur fuels. Institutional Arrangements
TAXING WAYS AND TAX RATE
The tax can be levied in two different ways:
1. A product tax. This tax is levied on the sulphur content of the applied fuels; and
2. An emission tax. This is a tax that is charges according to the actual emissions of sulphur dioxide. The tax is not imposed on sulphur that is either cleaned, detained in the ash, or detained in other products.
Tax Rates:
The tax is a uniform rate of DKK 20 per kilo of SO2. The tax rate has gradually increased between 1996 and 1999, and was due to reach full effect in 2000 (DEPA 1999, pp95).
Product tax: DKK 20/kg sulphur
Emission tax: DKK 10/kg sulphur
Latest figures from Sterner (2003) note a tax of US$1,300 per ton of sulphur emissions.
REVENUE-NEUTRAL OR NOT?PERSONAL OPINION
- Sulphur Content in Fuels. The sulphur content of both fuel gas oil and heavy fuel oil has fallen from 0.2% to 0.05%, and the sulphur content of coal has been reduced by a third
- Technology in Industry Plants. The tax has had a positive impact on the development of sulphur purification plants and technology,’There has been a 33% reduction of SO2 emissions in 1996 in the other “sectors” by a changeover to low sulphur content fuels reports a 76% reduction in sulphur emissions in Denmark between 1980 and 1997
- Economic View. Danish sulphur tax has an increasing revenue every year and the tax revenues were returned to the industry as a whole.
References:
1. Greening the Danish Tax System. http://docufin.fgov.be/intersalgnl/thema/publicaties/documenta/2011/BdocB_2011_Q2e_Larsen.pdf
Hi Amelia,
Thanks for sharing. Do you think the Danish Sulfur tax policy is effective in terms of the economic and environmental perspectives? Would you mind explaining the proportion of taxes refunded to the industry? Enjoy the rest of your weekend & Good luck with Vercammen’s exam on Monday!
Vicki
Interestin blog. This is the first time I know the Sulfure tax. Thanks for sharing. As you mentioned in the blog, the tax can be levied in two different ways which are a product tax and an emission tax. Which tax system works better in reality?