Environmental tax on products and services based on their carbon footprintthe case of Spain

Abstract

The main aim of this thesis is to define an environmental tax on products and services based on their carbon footprint. Hybrid-LCA is recognized as the most appropriate methodological tool for identifying the emission intensities on which the tax is based. The research highlights the significance of considering non-CO2 GHG emissions in environmental tax policies. Despite the fact that CO2 is the most important GHG and it is in the spotlight of most climate change mitigation actions, there are also other gases with higher global warming potential which are usually not considered. The potential impacts of the taxation are also assessed by using a Leontief price model, which allows the introduction of the tax on selected sector to induce changes in the production price. The effects of the tax both on the economy, on the environment and on the society are estimated. The results show that there is a clear trade-off between the environment, economy and society. The environmental and economic goals cannot be met at the same time with the environmental taxation unless there is a way in which the public revenues could be used to compensate those who are negatively affected by the tax. Furthermore, the implication of international trade between Spain and its important partners (import and export) in terms of emissions embodiment is also examined by constructing multi-regional input-output (MRIO) model. It highlights the high pollution embedded in the products imported from China. If pollution was taxed, then these imported products would have higher prices, making more competitive local markets.