[Podcast] The Impact of Environmental Protection and Renewable Energy Taxes on CO2 Emissions in Asia-Pacific Countries

Keywords: Environmental protection tax, Renewable energy, CO2 emissions, Asia-Pacific, Climate change, Air pollution, Emission reduction, economics, environment, environmental policy, Fossil energy, Clean energy sources, sustainable development, S-GMM, Budget revenue sources, Environmental protection investment, Sustainable energy sources, Energy competition, Economic development, Energy consumption Energy, Energy Security, Economic Benefits, Sustainable Development Policy

The Asia-Pacific region is facing a serious challenge of greenhouse gas emissions, therefore, it is necessary to apply measures to regulate the environment and encourage the use of renewable energy. Faced with this context, a student research group from the University of Economics Ho Chi Minh City (UEH) conducted the research project "The impact of environmental protection tax and renewable energy on CO2 emissions in countries in the Asia-Pacific region".

The Asia-Pacific region plays an important role in shaping global policies and actions to reduce CO2 emissions. Research on the moderating role of environmental taxes and renewable energy in this region makes a valuable contribution to building a sustainable future, minimizing the impact of climate change and protecting the environment for future generations.

A note on concepts

*Environmental Protection tax

Environmental protection tax is levied on goods or activities that are harmful to the environment. It is a way of using market incentives to encourage businesses and consumers to adopt more environmentally friendly behavior. According to Vietnam's Environmental Protection Tax Law, taxable objects are certain types of gasoline, coal, hydrochlorofluorocarbons, plastic bags and chemicals restricted from use. Tax rates vary depending on the type and quantity of goods. For example, the tax rate on gasoline is 3,000 VND/liter, and on coal is 10,000-20,000 VND/ton. Environmental protection tax is collected by tax authorities and is used for environmental protection activities.

According to Juqiu Deng, Jiayu Yang, Zhenyu Liu, Qingyang Tan (2023), Environmental protection tax is an important tool to drive environmentally friendly growth in heavily polluting enterprises, however, current studies have no consistent conclusion on whether and how environmental protection taxes can promote green innovation in heavily polluting industries. In addition, the enforcement of environmental protection tax laws has a significant impact on the environmental performance of businesses and this impact varies depending on the characteristics of the business such as ownership, scale, profits and industry (Xiaohong Shi, Zeyuan Jiang, Dongbei Bai, Shah Fahad & Muhammad Irfan 2023). However, in Juan Lu’s (2022) opinion, the Environmental Protection Tax can aggravate the illegal discharge of heavy polluting enterprises, especially at night, and have a more obvious impact on state-owned enterprises and enterprises with low profitability.

*CO2 emissions

CO2 emissions are the main contributor to human-induced climate change. CO2 is considered one of the main greenhouse gasses, capable of absorbing and retaining heat in the air, leading to increased average temperatures. CO2 emissions arise from many different sources, mainly originating from human activities \ as industrial production, transportation, energy consumption and forest management, especially due to manufacturing activities requiring fossil fuels (Parikh et al., 2009).

The continuous increase in CO2 emissions has caused many serious problems, listed as global warming, sea level rise, and increasingly complex natural disasters affecting ecosystems and human life. Therefore, reducing CO2 emissions is becoming an urgent challenge, requiring cooperation and joint efforts of the entire world. Efforts to reduce CO2 emissions may include: transitioning to renewable energy, increasing energy efficiency, encouraging public transportation and applying effective exhaust gas treatment technologies, strengthening forest management, protecting ecosystems and promoting the transition to a green economy, which plays an important role in reducing CO2 emissions and protecting our common living environment.

*Recycled energy

Some organizations, like the Texas Renewable Energy Industries Association, state that all renewable energy originated directly or indirectly from the sun or the natural movements and mechanisms of the environment. One of the clearer characterizations has been provided by the US Department of Energy (DOE), which separates renewable energy into six components: bioenergy derived from biomass resources; Geothermal energy originating from the earth's heat-producing processes; hydrogen, hydroelectricity or hydroelectric power; ocean energy; Solar; and wind energy (Coburn, Farhar, in Encyclopedia of Energy, 2004).

Renewable energy contributed about 10.9% of global energy demanded in 2002 and this number increases by 1.5% each year (World Bank, 2004).

The relationship between environmental protection tax and renewable energy

Environmental protection tax is a policy tool aimed at reducing CO2 emissions by increasing the cost of polluting energy sources and encouraging the use of renewable energy. However, the relationship between environmental protection taxes and renewable energy is not always simple and favorable. Other studies have also shown the negative correlation between CO2 and renewable energy in Asia-Pacific countries (i.e., when renewable energy accounts for a higher proportion in energy structure, CO2 emissions will decrease, and vice versa). Some causes of this relationship include:

Competition between energy sources. As environmental protection taxes are applied, polluting energy sources will be pushed up in price, thereby reducing their consumption demand. This will give room for renewable energy sources to grow and gain market share. However, as CO2 emissions increase due to economic activities or population, energy demand will also increase. This will make polluting energy sources competitive with renewable energy sources since they have a more stable and continuous supply.

Shift in production activities. When environmental protection taxes are applied, businesses using polluting energy sources will have to bear higher costs, thereby reducing their economic efficiency. This will encourage businesses to switch to using renewable energy sources or energy-saving technologies, thereby reducing CO2 emissions. However, this may also cause a shift of production activities to countries with lower taxes or no environmental protection taxes. This will cause the CO2 emissions of these countries to increase, while the CO2 emissions of countries applying environmental protection taxes decrease.

Dependence on other factors: When environmental protection taxes are applied, consumers will tend to choose renewable energy sources instead of polluting energy sources, thereby reducing CO2 emissions. However, the development of renewable energy also depends on other factors such as climate, geography, politics, culture, or economics. For example, some countries have favorable climate and geographical conditions for the use of renewable energy, listed as wind or solar power, while others do not. Some countries have policies that prioritize renewable energy development, such as licensing, financial support, or market guarantees, while others do not. Some countries have a green consumer culture, listed as being conscious of environmental protection, willing to accept new energy sources, or have energy saving habits, while some other countries do not. Some countries have priority policies for economic development, listed as having investment resources, infrastructure, or high consumption demand, while some other countries do not.

Therefore, the negative correlation of environmental protection taxes and renewable energy on CO2 variables is a complex and multidimensional phenomenon, reflecting the interaction between economic, environmental, and social factors.

Policy implications

To minimize the shift of polluting production activities to countries with lower or no environmental protection taxes, countries in the Asia-Pacific region need to coordinate and to unify in the establishment and application of environmental protection taxes. Countries also need to support and to share experiences on the design and implementation of environmental protection taxes, to ensure that they are beneficial to both the environment and the economy.

To improve the supply and consumption of renewable energy sources, countries in the Asia-Pacific region need to invest and to encourage research and development of renewable energy technologies. They also need to cooperate and exchange renewable energy technologies to take advantage of each country's favorable climate and geographical conditions, and to create interconnected and sustainable energy networks.

To move towards a green economy, save energy, and reduce greenhouse gas emissions, businesses and consumers in the Asia-Pacific region need to change consciousness and behavior. Businesses need to apply energy saving measures, to use renewable energy sources, or to switch to less polluting manufacturing industries. Consumers need to be conscious of environmental protection, accept and support new energy sources, or have the habit of saving energy in daily activities.

The research has implicitly contributed to SDG 8 - Decent work and economic growth, SDG 12 - Responsible consumption and production, and SDG 13 - Climate action. The entire article “The Impact of Environmental Protection and Renewable Energy Taxes on CO2 Emissions in Asia-Pacific Countries” can be found HERE.

Authors: Nguyen Hoang Bao Ngoc, Nguyen Tien Dat, Le Hoang - Ho Chi Minh City University of Economics

This article is part of the Green Research Community series with the message "Research Contribution for UEH Living Lab Green Campus". UEH cordially invites the community to watch the next Green Research Community newsletter #9.

*In order to create maximum conditions for developing the "UEH Green Researcher Community", community members will be able to attend research methodology classes on Living lab, Green Campus. In addition, if the product meets the required standards, the research team will be awarded a Certificate and funding from the UEH Sustainable University Project Board.

Further information:

SDG 8 - Decent work and economic growth:

Goal 8 is to promote inclusive and sustainable economic growth, employment and decent work for all, maintain per capita economic growth appropriate to national circumstances and, in particular, GDP growth of at least 7% per year, achieving higher levels of economic productivity through diversification, upgrading and innovating technology, promoting development-oriented policies to support production activities, creating sustainable jobs, startups, creativity and innovation besides improving the efficiency of global resource use and production, protecting labor rights and promoting a safe and secure working environment for all workers, strengthening the capacity of organizations domestic finance to encourage and expand access to banking, insurance and financial services for al, developing and implementing global strategies on youth employment and the International Labor Organization's Global Employment Compact and so on,

SDG12 - Responsible consumption and production:

Ensuring sustainable production and consumption patterns is the key towards sustaining the livelihoods of current and future generations. Implementing the 10-year program framework on sustainable production and consumption, all countries act together, with developed countries taking the lead, taking into account the development and capacity of developing countries.

By 2030, sustainably managing and efficiently using natural resources, halving global food waste per capita at the retail and consumer levels, and achieving an environmentally sound management environment for chemicals and all waste.

In addition, supporting developing countries to strengthen scientific and technological capacity to move towards more sustainable production and consumption models, developing and deploying tools to monitor development impacts for sustainable tourism.

SDG13 - Climate action:

Taking measures to combat climate change and its consequences by strengthening resilience and adaptation to climate-related hazards and natural disasters in all countries, integrating climate change measures into national policies, strategies and planning.

Improving education, awareness and human and institutional capacity for climate change mitigation, adaptation, impact reduction and early warning. Implementing commitments of developed countries participating in the United Nations Framework Convention on Climate Change, promoting mechanisms to improve effective planning and management capacity related to climate change in least developed countries.

News and photos: Authors, UEH Youth Union - Student Association, UEH Department of Marketing and Communication.