The Effect of a Carbon Tax Rise on Iceland’s Economy
Introduction
This report examines the potential impact of increasing carbon taxation in Iceland to achieve the government’s emission targets by 2030. The study is divided into two parts, focusing on the overall economy and the fishing industry specifically.
Part 1: Impact on the Overall Economy
A dynamic stochastic general equilibrium (DSGE) modeling exercise was conducted to assess the effects of higher carbon taxation on Iceland’s economy. The results indicate that to reach the 2030 emission target, an oil price hike of between 30% and 55% would be necessary. This would lead to a decline in GDP ranging from 0.3% to 0.6% by 2030. However, the impact on inflation would be minimal.
Part 2: Impact on the Fishing Industry
A panel regression analysis was performed to examine the impact of a carbon tax rise on the fishing industry. The findings suggest that a 40-50% increase in oil prices would be sufficient to reduce the emissions of the entire fishing fleet by 10%. This would result in a 4-5% increase in total factor costs for fishing companies. However, this cost hike is unlikely to pose a significant threat to the competitiveness of the fishing industry.
Assumptions
Both approaches assume that a carbon tax rise would not affect production technology.
Conclusion
The study highlights the potential economic impacts of higher carbon taxation in Iceland. While achieving the emission targets by 2030 would require significant oil price hikes and could lead to a decline in GDP, the fishing industry is expected to remain competitive despite the increase in total factor costs. These findings align with the Sustainable Development Goals (SDGs), particularly SDG 13 (Climate Action) and SDG 14 (Life Below Water), which aim to combat climate change and promote sustainable use of marine resources.
SDGs, Targets, and Indicators
1. Which SDGs are addressed or connected to the issues highlighted in the article?
- SDG 7: Affordable and Clean Energy
- SDG 9: Industry, Innovation, and Infrastructure
- SDG 13: Climate Action
2. What specific targets under those SDGs can be identified based on the article’s content?
- SDG 7.2: Increase substantially the share of renewable energy in the global energy mix.
- SDG 9.4: Upgrade infrastructure and retrofit industries to make them sustainable.
- SDG 13.2: Integrate climate change measures into national policies, strategies, and planning.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
- Percentage increase in renewable energy share in the energy mix.
- Investment in infrastructure upgrades and industry retrofitting.
- Inclusion of climate change measures in national policies, strategies, and planning.
Table: SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 7: Affordable and Clean Energy | SDG 7.2: Increase substantially the share of renewable energy in the global energy mix. | Percentage increase in renewable energy share in the energy mix. |
| SDG 9: Industry, Innovation, and Infrastructure | SDG 9.4: Upgrade infrastructure and retrofit industries to make them sustainable. | Investment in infrastructure upgrades and industry retrofitting. |
| SDG 13: Climate Action | SDG 13.2: Integrate climate change measures into national policies, strategies, and planning. | Inclusion of climate change measures in national policies, strategies, and planning. |
Behold! This splendid article springs forth from the wellspring of knowledge, shaped by a wondrous proprietary AI technology that delved into a vast ocean of data, illuminating the path towards the Sustainable Development Goals. Remember that all rights are reserved by SDG Investors LLC, empowering us to champion progress together.
Source: oecd-ilibrary.org
Join us, as fellow seekers of change, on a transformative journey at https://sdgtalks.ai/welcome, where you can become a member and actively contribute to shaping a brighter future.
