Funded by: European Commission FP6


December 2004 to November 2006

PSI researchers:

Roger Salmons

Background, summary and aims

Background and Aims

COMETR is a Specific Targeted Research Project financed under the EU Sixth Framework Programme for Research. It is coordinated by the National Environmental Research Institute (NERI) in Denmark, and has six partners. Details of the project are provided on the project website:

The overall aim of the project is to advance the debate on competitiveness effects of environmental tax reform (ETR). The specific objectives are:

  • to outline and clarify the competitiveness debate;
  • to review the experience in environmental tax reforms in EU member states, with particular emphasis on carbon-energy taxation;
  • to analyse world-market conditions for a set of energy-intensive sectors or sub-sectors, as a framework for considering competitiveness effects;
  • to undertake bottom-up modelling of the effects of environmental tax reforms on sector-specific energy usage and carbon emissions in member states with industrial carbon-energy taxes;
  • to undertake a macro-economic analysis of the competitiveness effects of green tax reforms for individual member states as well as for the EU as a whole;
  • to provide ex-post figures for environmental decoupling and assess carbon leakage on basis of a comprehensive analysis, taking changes in import-export ratios into account;
  • to review mitigation experiences and provide policy advice on possible strategies to improve efficient mitigation measures.

Project Design

The project comprises six main work-packages:

  • WP1 Conceptual and Theoretical Clarification: will provide a brief review the experiences of ETR in Member States and acceding Member States, and will provide conceptual clarification of the competitiveness issue.
  • WP2 Market Structure Analysis: will analyse the world market structure for a set of energy-intensive sectors or sub-sectors, to assess the global context in which European industries operate.
  • WP3 Bottom-up analysis of short-run tax effects: will analyse the short-run effects of ETR on the competitiveness of 5-8 industrial sectors in Denmark, Sweden, Finland, Netherlands, Germany, UK and Slovenia).
  • WP4 Macro-economic modelling of long-run tax effects: will analyse the inter-industry and other indirect effects, as well as international competitiveness effects, which cannot be well accounted using the bottom-up approach.
  • WP5 Environmental effects and specific carbon leakage: will consider the environmental effects of ETR and in particular the potential displacement of industrial production and related carbon emissions to other geographical areas.
  • WP6 Green tax reform design and evaluation of mitigation practices: will consider the design of environmental tax reforms and experiences with mitigation practices, pulling together the insights gained in the preceding work packages.

Importance of Research

The research is relevant for understanding the economic and environmental implications of ETR, notably carbon-energy taxes. ETR is the subject of an ongoing debate that has focussed on two issues: the impact of the reforms on the competitiveness of individual firms and sectors, and hence the impact on overall social welfare at the national level; the likelihood that the environmental benefits will be undermined by the displacement of emissions (i.e. carbon leakage). This project will contribute to the debate by providing an ex-post evaluation of the experiences of ETR in seven EU member and accession states since 1990, together with an ex-ante appraisal of potential tax reforms over the next six years.