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Tax Aspects of Tradable Emission Permits
A Business Perspective
Stockholm,15 June 2009
An Theeuwes, Manager Tax Policy
Shell International BV
Agenda for today
• Tax aspects of Tradable Emission Permits: what is the
current situation?
• What are our business concerns about this?
• What specific tax obstacles do we see in this respect?
• What is our tax view on Tradable Emission Permits?
Tax Aspects of Tradable Emission Permits: current
situation
The BAD NEWS
•
•
Multiple tools still considered to deal with
Climate Change (ETS, Carbon Tax),
complicating planning assumptions
The GOOD NEWS
•
More and more countries are choosing
for an Emission Trading System (ETS)
Regulatory frameworks set up are not
sufficiently comprehensive:
•
Accounting standards under
development
•
ETS and taxation begin to be considered
in support of implementation of
technological innovations to deal with
climate change
–
Accounting treatment not regulated
–
Tax treatment often not specified
–
Liability, technical or legal issues may not be
recognized
•
Development and implementation of
technological innovations to deal with
Climate Change (like CCS) are costly
•
Concerns on competitiveness hinder
introduction of ETS
Business concerns
PREDICTABL
E
• Clear, simple, standard legislation
with long term application
EFFICIENT
• Cost-efficient in content and
application and avoiding
duplication
SUSTAINABL
E
• Supporting innovation and
ensuring business
competitiveness
Specific Tax obstacles
• Predictable planning to be possible (e.g. European ETS
should avoid different local tax treatment)
• Tax rules applicable to ETS to be specified (e.g. Australian
Tax legislation)
• Applicable tax rules to be aligned as much as possible (e.g.
valuation rules)
• Conflicting interpretations to be avoided (e.g. serviceintangible rather than good-tangible for VAT, import/export
duties etc)
Specific tax obstacles
• All costs deductible (e.g. costs of obtaining additional rights
not to be considered non-deductible fines)
• Easy to administer (e.g. to be treated within existing tax
framework)
• Emissions covered by ETS not to be submitted to other
carbon related levies (e.g. European Energy Tax Directive)
Specific Tax obstacles
• Tax treatment to support costly innovations (e.g. allowing tax
deductibility of CCS costs taken as credit under ETS)
• Tax treatment in support of profit neutrality of ETS (e.g. not
taxing grant as grants should be allowed to avoid carbon
leakage)
• Avoiding double taxation of emissions trading (e.g. through
valuation issues)
What is our tax view on Tradable emission permits?
Emissions Trading goes Global – Tax rules are still local
New technology mechanisms evolve (e.g. for CCS)
CDM
China adopts CCS standard
CDM evolves to includes sectors
Japan technology standards
Linkages develop between all systems and
more systems appear
Norwegian ETS
EU-ETS
2000
2005
Pre-Kyoto
Danish-ETS
UK-ETS
Expanding EU-ETS
2010
Kyoto
2015
Post 2012
New Zealand ETS
Australian ETS
US National ‘cap-and-trade’
2020
2025
Linkage framework
To allow an international solution to an international
problem
An ETS should specify clear tax rules within existing
tax frameworks, that allow deductibility of all relating
costs, harmonized across applicable countries and
supporting innovation and competitiveness