Conversion Technologies 101
other hand, carbon tax sends more certain message to the markets about the price of
the emissions. Once the emissions are taxed, even economic slowdown will not impact
the overall cost to the emitter. Under emissions trading system, however, economic
slowdown results in lower production and lower emissions, which in turn drive the cost
of the emissions down sending a negative message to those who wish to invest in more
environmentally friendly technologies. It is also fairly difficult to predict and administer
the exact amount of carbon credits allocated to the market and even more so to adjust
it when excessive allocation was made. In 2007, oversupply of carbon credits to EU
Emission Trading Scheme resulted in the price to drop to zero. Subsequent economic
crisis resulted in the drop of production and rendered the whole system inefficient.
Any subsequent attempts to withdraw part of the carbon credits from the market
were successfully blocked by the emitters. There is therefore evidence that carbon
emissions trading may be more difficult to administer, more prone to political pressure
and lobbying from carbon-intensive industries and require larger administration and
bureaucracy than carbon tax does. Appropriately structured carbon tax could become
a system that has positive environmental and social impacts. To ensure the efficiency
of CO 2 emissions reduction, carbon tax should be administered as early as possible in
the life cycle scheme. Ideally during first sale of a fossil resource, collected tax should
be proportional to the CO 2 quantity that will be emitted during its utilisation. This
will raise the costs of all processes and products in a way that is directly proportional
to the environmental damage done by the resource. The tax should be rising in a
predictable manner within certain also predictable timeframes to ensure that the
message to the markets is clear and that the shift towards low carbon economy is a
long-lasting trend and worth investing in. The carbon taxation should be introduced
for the goods imported from outside the taxation region in the quantity identical to
the carbon intensity of the resource used to make a product. Lastly, tax cuts should
be administered to alleviate raising costs of the energy taking into consideration the
less privileged groups of the society aiming for strengthening the middle class. These
tax cuts could include, but are not limited to raising income tax threshold (higher tax
free income), lowering personal income or VAT rates especially for the basic goods like
food or public transport, lowering taxation burden on small and medium companies
and so on.
Combination of these factors is likely to provide an efficient solution that can steer
the development of the economies towards the sustainable future. From the environ-
mentally efficient biomass utilisation point of view, such tax could bring significant
benefits as well. First, products derived from fossil resources would become more
expensive, with the increase of price corresponding to energy intensity of the process
that was used to produce them. This would promote less carbon-intensive production
methods and in the longer term introduction of biomass-derived replacements.
Second, the energy-intensive bio-fuels like corn ethanol would make little economic
sense and transition towards more efficient technologies would inevitably take place.
Considering that agriculture is currently the fourth largest source of greenhouse
gas emissions [59] following scheme would promote low input feedstocks such as
Miscanthusor switchgrass due to the raise of costs of fertilisers and fuels. Therefore
in the long term, introduction of a tax on fossil fuels, that is, non-renewable carbon
will quickly give stimulus to develop renewable carbon technologies including biomass
technologies.
