Emissions Trading by Martin Kellaway (ONS)
Emissions Trading Explain UK thoughts on classification Similar schemes Data estimation for EU-ETS (free allowances & auctions)
Fossil Fuel Levy & ROCs FFL: scheme where fossil fuel energy producers taxed, proceeds passed onto cleaner producers. Replaced by ROCs scheme Each electricity supplier was obliged to purchase a proportion of electricity from renewable electricity generators. When they made such purchases they were issued with a certificate.
ROCs Each supplier had to surrender enough certificates at the end of the period and if they did not they had to pay the Government’s regulator. The proceeds were distributed to those suppliers that surrendered the certificates. A market in the certificates was established and trading took place. Economic reality: no different from before – government forcing a redistribution Recorded as imputed tax & subsidy (market sets the tax rate)
ETS EU-ETS follows same model as ROCs. Redistribution from over-emitters to under-emitters. D.29 – D.39 tax on pollution Due to international dimension, tax and subsidy amounts will differ within national territory.
Data – Redistribution in Phase 1 Source data were received on the amounts by which over- emitters emitted more than their allowances in each year, and the amount by which under-emitters emitted below their allowances. In UK there was net over-emission compared to the target. Thus for UK producers the tax component is greater than the subsidy component, the difference effectively representing ‘subsidies’ to under-producers in other EU countries. The amount by which the over-emitters exceed their allowances provides an indication of how much they need to purchase on the market. This is then multiplied by the market price to estimate the tax payable.
Data – Redistribution in Phase 1 Accrues in year production takes place. This produces following estimates of redistribution imputations for UK producers: 2005 €1.0bn, 2006 €1.1bn, 2007 €0.0bn and the following imputed subsidies: 2005 €0.4bn, 2006 €0.5bn, 2007 €0.0bn.
Free allowances in Phase 1 Also subsidy & tax effect from granting of tradable permits without charging Similarly modelled 2005 €3.4bn; 2006 €4.3bn; 2007 €1.2bn. In financial account, the tax & subsidy are balanced by F.79 accounts receivable/payable (timing) and issue of F.3 securities.
Emissions Trading Phase 1 – considered as international tax (EU) Phase 2 – still international tax (UN) Auctions Phase 2, some auctions. When the production (tax) has already accrued, government cash receipts are the settlement of the tax receivables, a financial asset. Mostly front-loaded, auctions throughout phase - higher in earlier years When an auction occurs before the tax accrues it is the “sale of future tax revenue”.
Emissions Trading “sale of future tax revenue”. The Manual on Government Deficit and Debt treats the securitisation of future tax revenue as government borrowing. When the tax accrues, this borrowing is repaid in the National Accounts. The financial asset representing the borrowing here is tradable, so is classified as a security other than share (in category F.332). It is unusual in that no interest is payable on the financial instrument, unless imputed.