Carbon footprint - a luxury good : implications for a Norwegian tax proposal
Master thesis
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http://hdl.handle.net/11250/2432526Utgivelsesdato
2016Metadata
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- Master Thesis [4487]
Sammendrag
Consumption-based emissions from international trade are substantial, but are not
reported to the UNFCCC. In this master thesis, we have analysed the relationship
between individual expenditure and the consumption-based carbon footprint in 2012,
using a two-region model to account for trade. Total average per capita emissions is
10 tonnes CO2, and indirect imported emissions accounts for 43% of the total carbon
footprint. The carbon elasticity in Norway is likely above one, as our results indicate
that it is 1.19. More specifically 1.37 for indirect imported emissions, 1.09 for indirect
domestic emissions and 1.1 for direct emissions. In other words, the relationship
between consumption-based emissions and expenditure are increasing at the margin.
Therefore, carbon emission is a luxury good, and a tax would be progressive. The
cause appears to be the cheap, clean electricity in Norway. Reviewing the literature
to assess unilateral policy options, we find a broad consensus in favor of a carbon
tax. However, as the estimates for the current social cost of carbon ranges from 12
USD/tonne CO2 to 900, setting a tax level is dicult.
Implementing a carbon tax
unilaterally also demands a border carbon adjustment (BCA) to protect the exposed
industry, and avoid carbon leakage. The empirical results indicate that this is not
particularly e↵ective. Levying the tax upstream would be preferred, but is impossible
with most imported goods. Generalized emission intensities for product categories can
be utilized, but will create adverse incentives and perhaps increase global emissions.
More accurate estimates would help, but increase costs and complexity. Challenges
aside, Norway are all but dependent on the e↵orts of other, larger nations, if we are
to avoid potential damages to our economy caused by climate change. Setting an
example for others to follow may be the only way to achieve this, and we should
therefore start to pursue unilateral e↵orts in the product categories that yields the
most reductions.