CO2 tax as incentive for sustainability

In France, Finland, Ireland and Switzerland it already exists: the VEK (Vergoeding Externe Kosten), a tax on CO2 emissions for companies. VAT on greenhouse gas so to speak. Climate-damaging products such as coal power become more expensive, climate-friendly products such as wind power do not. This levy has now also been proposed for the Netherlands in the Lower House.

It would be an alternative to the tradable emission rights, ETS. Large and small companies would pay the same surcharge for their CO2 emissions. Each producer must declare how much greenhouse gas his production process produces. These emissions would be taxed as soon as the company sold a product or service, exactly as is currently the case with VAT. If a product emits a kilo of CO2, a VEK levy is imposed on that kilo. VEK is levied on every company involved in the chain. The consumer who buys the end product pays for the complete CO2 emissions in the entire chain.

Standards

In determining a company's CO2 emissions, standards will probably be used. If you can show that you emit less, then your contribution will be lower. And then your product becomes cheaper. This will encourage companies to opt for more climate-friendly production methods. When exporting, the VEK can be reclaimed, just as with VAT. And when importing products, VEK must also simply be levied. This will not distort competition.

Impact on prices

The amount of the tax depends on the desired effect. CE Delft has calculated three rates for some products: 25 euros per ton, roughly the price level of current emission allowances; 100 euros per ton, and 250 euros per ton, which will ultimately be needed to meet the Paris climate targets. At VEK's highest rate, 250 euros per ton, the tomato with the most CO2 (a tomato from a gas-fired Dutch greenhouse) would become around 16 percent more expensive than those of more climate-friendly competitors.
Lower-income people should receive an energy surcharge to prevent them from getting into trouble meeting their basic needs.

Simpler and fairer prices

Limburg Deputy Agriculture Minister Hubert Mackus sees serious opportunities for the VEK. "With a simpler and fairer system, climate costs are better distributed and we make the real price of different farming methods more transparent throughout the chain. It will also motivate industry and businesses to collaborate with the agricultural sector by making use of each other's residual streams and therefore increasing efficiency per kilo of CO2. For that reason I see something in the VEK. It fits in with the pilot that we as the Province have done with a number of entrepreneurs to make the added value of a more sustainable production transparent and to settle it in the actual price."

Source: Volkskrant