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Carbon pricing – economic impact and preconditions


Published: 16 February 2022

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A European or Dutch carbon tax will affect the Dutch economy in almost equal measure. Our economy will actually benefit from an international tax, however. This is demonstrated in a study commissioned by ABN AMRO Bank, MN, PGGM, De Volksbank and initiator Rabobank, and conducted by a working group of the Platform for Sustainable Financing. The study involved several scenarios, including the introduction of a national, European or international carbon tax.

Research findings

The conclusion of the study 'The impact of carbon pricing' is that a European or Dutch carbon tax would affect the Dutch economy in almost equal measure, but that an international tax would even have a favourable impact. The study also indicates that the introduction of a carbon tax requires high-quality data, including data on emissions at a granular level. Furthermore, a broader approach is needed in order to meet the targets of the Paris Climate Agreement. For example, in addition to considering the price of emissions and focussing on emission reduction, more attention must be paid to the preservation of biodiversity. 

Economic impact

For the Dutch economy, introducing a carbon tax in the Netherlands only or in the 'EU+' (the European Union plus the UK, Iceland, Liechtenstein, Norway and Switzerland) does not make a significant difference. The impact on Dutch GDP of a Dutch or European carbon tax of about €90 is almost the same, resulting in a decrease of 2.5% and 2.6% respectively in 2030 compared to the baseline projection. This is evident from a macro-economic study carried out by the working group. If the same carbon tax is introduced in the EU+ as well as in major economies such as the United States, China, Canada, Japan and Australia, a number of sectors in the Netherlands will actually benefit. These sectors include the service industries, construction, machinery and electronics. The study also shows that sectors with high emissions, such as electricity, aviation and chemicals, are hit hardest when they have to pay tax on their emissions. 

Calculating emissions for the agriculture and food sectors is complex

The study also looks at the potential impact of a carbon tax on the agricultural and food sectors. The researchers conclude that it is currently still complex to accurately measure greenhouse gas emissions at the level of individual farms. At present there is no widely accepted standard for carbon calculation, because many variables such as grassland, stables, manure, animals and machinery have to be taken into account. Further research into this is important, according to the research team. 

Access to data and promotion of new technologies

The study also shows that good access to information on companies’ carbon emissions and government policies to promote the development of new technologies – such as the European Commission's Fit for 55 plan – are important preconditions for the transition to a green economy. 

More is needed to achieve the Paris targets

Finally, the researchers argue that measures to reduce greenhouse gas emissions are not enough to achieve the climate targets. Emission reduction, for example, does not lead to less biodiversity loss. The working group therefore advocates a broader view when drawing up climate plans. 

The Impact Of Carbon Pricing (2022)

Download The Impact Of Carbon Pricing (2022)

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