Motivation: wanted to understand how carbon pricing per tonne of CO₂ emission relates to energy cost per energy unit and to energy productivity of an economy.

A carbon tax is a way to price carbon dioxide (CO₂) emissions in order to reduce global warming emissions. Similarly investments to reduce CO₂ emissions, such as renewables or insulation of buildings, are sometimes funded from tax income. This page investigates the financial impact of carbon taxation, as well as funding limits to reduce the carbon footprint. We do so in three parts:

• First we compute the price per kiloWatt-hour (kWh) for different fossil fuels and carbon tax levels, and compare these with a few examples of carbon taxation and energy subsidies, as well as with human energy.
• Next we summarize energy use per person and energy productivity for gross (or primary) and final (or secondary) energy. We observe that the upper limit of energy taxation or funding decarbonization is surprisingly low.
• Finally we compute the share of gross domestic product (GDP) of a few carbon tax levels. This is done for gross energy assuming 100% coal, crude oil or natural gas. We see that for countries with a low energy productivity the impact of a carbon tax can be significant, even when per person energy consumption is lower than other countries.

Appendix A details fossil fuel price assumptions.

Appendix B shows a bar chart of energy intensity, the inverse of energy productivity, for different world regions in Figure 1.

Appendix C shows energy productivity for more European countries in Table 5.

1. Carbon tax price level per energy unit (kWh)

The amount of carbon emissions depends on the type of fossil fuel. We apply the same methodology as BP [1] to estimate CO₂ output in kg per terrajoule (TJ) for coal, crude oil and natural gas. Using these values we compute the amount of kilogram CO₂ per kWh, as well as the price in Euro per kWh for a carbon tax of 25, 50, 100 and 200 Euro per metric tonne of CO₂. In all shown cases we speak about a few Euro-cents per kWh. For comparison we also mention the fossil fuel price in Euro per kWh for the year 2018, emphasized in color. In 2020 fossil fuel prices decreased significantly. We observe that higher carbon tax values exceed the energy price, to tax their air pollution impact.

Table 1: Carbon tax assumptions

Fossil fuel	kg CO2 per TJ	kg CO2 per kWh	price EUR/kWh (1)	25 EUR/tonne CO2 tax	50 EUR/tonne CO2 tax	100 EUR/tonne CO2 tax	200 EUR/tonne CO2 tax
Coal	94600	0.341	0.0101 EUR/kWh	0.00851 EUR/kWh	0.0170 EUR/kWh	0.0341 EUR/kWh	0.0681 EUR/kWh
Crude oil	73300	0.264	0.0365 EUR/kWh	0.00660 EUR/kWh	0.0132 EUR/kWh	0.0264 EUR/kWh	0.0528 EUR/kWh
Natural gas	56100	0.202	0.0188 EUR/kWh	0.00505 EUR/kWh	0.0101 EUR/kWh	0.0202 EUR/kWh	0.0404 EUR/kWh

_{(1) Fossil fuel energy prices for the year 2018, assumptions detailed in Appendix A, Table 4.}

The CO₂ tax range in Table 1 has been selected on actual market values:

• The EU Emission Trading System (ETS) puts a cap on CO₂ emission for industry. Prices evolved from 7.5 Euro/tonne CO₂ in 2018 to 25 Euro/tonne CO₂ mid 2020 [2].
• In Sweden carbon tax increased gradually from 24 Euro/tonne CO₂ for residential users in 1991 to 110 Euro/tonne CO₂ for residential and industrial users (those not covered in the EU ETS) in 2020 [3].

Another way of taxing energy is using tax income to promote renewables. These subsidies can significantly exceed a carbon tax level of 200 Euro/tonne CO₂, and typically decrease when renewable technologies become cheaper. This is shown for wind and solar subsidies in Belgium:

• Wind energy certificates in June 2020 are 0.11 Euro/kWh [4].
• Solar energy certificates evolved from 0.45 Euro/kWh in 2009 (guaranteed for 20 years) to 0.09 Euro/kWh in 2018 (guaranteed for 15 years) [5].

When compared to human labor, fossil fuels are cheap, even with a carbon tax. Consider the daily energy intake of a person of 2700 kilo-calories, which corresponds to 3.14 kWh. Most of this energy is used to maintain body heat, but let us assume for simplicity that all this human energy is available for labor during twenty days a month. Then a fossil fuel energy cost of 0.05 Euro/kWh would result in a cost of 3.14 Euro/month. Adding a carbon tax of 0.1 Euro/kWh would triple the cost to 9.42 Euro/month. This illustrates that energy cost is cheap compared to human labor, and explains why the daily energy consumption per person in the world significantly exceeds that of a person, as shown in the part two. Still carbon taxation can have a significant impact countries with a low energy productivity (or a high energy intensity), as shown in part three.

2. Energy use per person and energy productivity

To compare different countries or regions it is convenient to normalize energy use per person, and we do so using (average) kWh per day per person (kWh/d/p). This done for gross - or primary - and final - or secondary - energy consumption in Table 2. Gross energy consumption is for the raw energy input. This raw input is transformed to final energy, typically resulting in a lower amount of final energy available for users. Examples are converting coal or natural gas to electricity, and refining crude oil to heating oil, gasoline or kerosene. Table 2 also shows energy productivity for gross and final energy. This value is obtained by dividing the gross domestic product of a region by its total energy consumption. To compute these values we use data from Eurostat [6][7][8] for Europe and the assumptions from [9] for the world. As regions of Table 2 we select the countries with lowest and highest gross energy productivity in Europe: Bosnia & Herzegovina and Ireland, as well as for the EU27 and the world. More values of normalized energy consumption and productivity are available in [8] and in Table 5 of Appendix C. The world average daily gross energy consumption per person of 58.8 kWh/d/p significantly exceeds the human energy intake of 3.14 kWh/d shown in part one. Table 2: Energy efficiency and productivity examples for year 2018

Region	Gross energy consumption	Final energy consumption	Gross energy productivity	Final energy productivity
Bosnia & Herzegovina	68.0 kWh/d/p	38.3 kWh/d/p	0.20 EUR/kWh	0.35 EUR/kWh
World (1)	58.8 kWh/d/p	40.8 kWh/d/p	0.46 EUR/kWh	0.66 EUR/kWh
EU27	92.7 kWh/d/p	58.9 kWh/d/p	0.78 EUR/kWh	1.24 EUR/kWh
Ireland	97.8 kWh/d/p	74.0 kWh/d/p	1.90 EUR/kWh	2.51 EUR/kWh

_{(1) For the world similar estimates as in 'Energy storage' [9] are used for 2018:}

• _{Gross energy: 163 000 TWh}
• _{Final energy: 113 000 TWh}
• _{Population: 7.592 billion persons [10]}
• _{GDP: 75 100 billion EUR}

3. Carbon tax expressed as GDP share

While the carbon tax per kWh from Table 1 seem low, energy productivity is also small due to the huge amount of energy that is consumed world-wide as shown in Table 2. Here we study the impact of carbon tax on GDP, assuming all gross energy consists out of coal, crude oil or natural gas. In practice any combination of these fossil fuels is possible, and renewable sources or nuclear power can also be used in the energy mix. In Table 3 we express a range of carbon taxes as share of the gross domestic product for Bosnia & Herzegovina, the world, the EU27 and Ireland. From Table 2 we see that Bosnia & Herzegovina has the lowest energy consumption per person, still the carbon tax takes the biggest share of GDP compared with the EU27 and Ireland; even when using gas instead of coal. This is mainly explained by the energy productivity that is significantly lower for Bosnia and Herzegovina.

Table 3: Carbon tax examples for year 2018

Gross energy assumption	25 EUR/tonne CO2 tax	50 EUR/tonne CO2 tax	100 EUR/tonne CO2 tax	200 EUR/tonne CO2 tax
Bosnia & Herzegovina 100% coal	4.26% of GDP	8.51% of GDP	17.0% of GDP	34.1% of GDP
World 100% coal	1.85% of GDP	3.70% of GDP	7.39% of GDP	14.78% of GDP
EU27 100% coal	1.09% of GDP	2.18% of GDP	4.37% of GDP	8.73% of GDP
Ireland 100% coal	0.45% of GDP	0.90% of GDP	1.79% of GDP	3.58% of GDP
Bosnia & Herzegovina 100% crude oil	3.30% of GDP	6.60% of GDP	13.2% of GDP	26.4% of GDP
World 100% crude oil	1.43% of GDP	2.86% of GDP	5.73% of GDP	11.45% of GDP
EU27 100% crude oil	0.85% of GDP	1.69% of GDP	3.38% of GDP	6.77% of GDP
Ireland 100% crude oil	0.35% of GDP	0.69% of GDP	1.39% of GDP	2.78% of GDP
Bosnia & Herzegovina 100% natural gas	2.52% of GDP	5.05% of GDP	10.1% of GDP	20.2% of GDP
World 100% natural gas	1.10% of GDP	2.19% of GDP	4.38% of GDP	8.77% of GDP
EU27 100% natural gas	0.65% of GDP	1.29% of GDP	2.59% of GDP	5.18% of GDP
Ireland 100% natural gas	0.27% of GDP	0.53% of GDP	1.06% of GDP	2.13% of GDP

4. Conclusion

By combining carbon tax levels with data on the gross domestic productivity as well as energy consumption per day per person we make following observations:

• Compared to human labor, fossil fuel energy is cheap, even with carbon taxes are applied.
• Still energy productivity puts a limit on the carbon tax level, or on renewable energy subsidies. Countries with a low energy productivity, or a high energy intensity, are more impacted by this constraint.

Acknowledgement: many thanks to

• Eurostat, part of the European Commission, for allowing free re-use of energy balances and related data. Website: ec.europa.eu/eurostat/web/energy.
• the Our World in Data team for open access to their data and interactive figures. Website: ourworldindata.org. Most Our World in Data work is licensed under CC BY 4.0, unless mentioned otherwise.

Disclaimer: This work provides a summary of the original data, converting ktoe (kilo ton oil equivalent) values to other energy units such as relative percentages, TWh (TeraWatt-hours) and normalized kWh/d/p (kiloWatt-hours per day per person) values. Values are rounded to 3 significant digits. Eurostat is not responsible for data conversion or rounding errors in doing so.

References:

History:

August 2020

Appendix A

Table 4 details fossil fuel price estimates for the year 2018. As a basis we use the fossil fuel prices from Figures 1,2.3 from OurWorldInData.org [11] and an exchange rate of 1.2 Euro/USD for 2018. Fossil fuel prices fluctuate over time, and can different between different regions in the world. For example in 2020 fossil fuel prices decreased significantly.

Table 4: Fossil fuel price estimates for 2018

Fossil fuel	Price assumption	Price 2018	Conversion to kWh	USD/kWh	EUR/kWh
Coal	Northwest Europe - bituminous	60.68 USD/tonne	5000 kWh/tonne	0.0121 USD/kWh	0.0101 EUR/kWh
Crude oil	Global price	71.31 USD/barrel	1628.2 kWh/barrel	0.0438 USD/kWh	0.0365 EUR/kWh
Natural gas	Average German import	6.62 USD/MMBtu	293.08 kWh/MMBtu	0.0226 USD/kWh	0.0188 EUR/kWh

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Appendix B

Figure 4 shows the energy intensity for different regions, as published online at OurWorldInData.org [12]. Lower values are better. Energy intensity (EI) is the inverse of energy productivity (EP) and vice versa: EP = 1/EI . Primary - or gross - energy is used, and USD as currency - currency exchange rates need to be taken into account for comparing other currencies such as the Euro. Over the past 25 years energy intensity significantly dropped, and energy productivity increased. This is good and can be shown visually by using the play button in Figure 1. Also other regions and countries can be added.

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Appendix C

Table 5 shows energy productivity in Euro/KWh for a larger set of countries, based on Eurostat data from [6][7]. Higher energy productivity values indicate a lower energy intensity of an economy - for an identical currency unit.

Table 5: Energy productivity overview for year 2018

Country (2018)	Inhabitants [million persons]	GDP [billion EUR]	Gross inland consumption [TWh]	Final energy consumption [TWh]	Gross energy productivity [EUR/kWh]	Final energy productivity [EUR/kWh]
EU27	508.0	13500	17200 TWh	10900 TWh	0.78 EUR/kWh	1.24 EUR/kWh
Albania	2.87	12.8	27.4 TWh	24.6 TWh	0.47 EUR/kWh	0.52 EUR/kWh
Austria	8.82	386	395 TWh	303 TWh	0.98 EUR/kWh	1.27 EUR/kWh
Bosnia and Herzegovina	3.5	17.1	87.0 TWh	49.0 TWh	0.2 EUR/kWh	0.35 EUR/kWh
Belgium	11.4	460	640 TWh	385 TWh	0.72 EUR/kWh	1.19 EUR/kWh
Bulgaria	7.05	56.1	221 TWh	113 TWh	0.25 EUR/kWh	0.49 EUR/kWh
Croatia	4.11	51.6	101 TWh	77.7 TWh	0.51 EUR/kWh	0.66 EUR/kWh
Cyprus	0.864	21.1	30.6 TWh	18.4 TWh	0.69 EUR/kWh	1.15 EUR/kWh
Czech Republic	10.6	211	507 TWh	281 TWh	0.42 EUR/kWh	0.75 EUR/kWh
Denmark	5.78	301	213 TWh	164 TWh	1.42 EUR/kWh	1.84 EUR/kWh
Estonia	1.32	26.0	73.2 TWh	33.6 TWh	0.36 EUR/kWh	0.77 EUR/kWh
Germany	82.8	3340	3660 TWh	2340 TWh	0.91 EUR/kWh	1.43 EUR/kWh
Greece	10.7	185	277 TWh	176 TWh	0.67 EUR/kWh	1.05 EUR/kWh
Finland	5.51	234	406 TWh	292 TWh	0.58 EUR/kWh	0.8 EUR/kWh
France	66.9	2360	2960 TWh	1630 TWh	0.8 EUR/kWh	1.45 EUR/kWh
Hungary	9.78	134	311 TWh	208 TWh	0.43 EUR/kWh	0.64 EUR/kWh
Iceland	0.348	21.9	76.5 TWh	37.2 TWh	0.29 EUR/kWh	0.59 EUR/kWh
Ireland	4.83	327	172 TWh	130 TWh	1.9 EUR/kWh	2.51 EUR/kWh
Italy	60.5	1770	1830 TWh	1330 TWh	0.97 EUR/kWh	1.33 EUR/kWh
Kosovo	1.8	6.73	30.1 TWh	17.1 TWh	0.22 EUR/kWh	0.39 EUR/kWh
Lithuania	2.81	45.3	90.7 TWh	63.3 TWh	0.5 EUR/kWh	0.71 EUR/kWh
Luxembourg	0.602	60.1	52.4 TWh	43.5 TWh	1.15 EUR/kWh	1.38 EUR/kWh
Latvia	1.93	29.1	55.7 TWh	46.8 TWh	0.52 EUR/kWh	0.62 EUR/kWh
Malta	0.476	12.4	9.82 TWh	5.98 TWh	1.26 EUR/kWh	2.07 EUR/kWh
Montenegro	0.622	4.66	12.5 TWh	8.48 TWh	0.37 EUR/kWh	0.55 EUR/kWh
North Macedonia	2.08	10.7	29.9 TWh	21.3 TWh	0.36 EUR/kWh	0.5 EUR/kWh
Netherlands	17.2	774	906 TWh	523 TWh	0.85 EUR/kWh	1.48 EUR/kWh
Norway	5.3	368	342 TWh	222 TWh	1.08 EUR/kWh	1.66 EUR/kWh
Poland	38.0	497	1240 TWh	814 TWh	0.4 EUR/kWh	0.61 EUR/kWh
Portugal	10.3	204	279 TWh	188 TWh	0.73 EUR/kWh	1.08 EUR/kWh
Serbia	7.0	42.9	181 TWh	98.1 TWh	0.24 EUR/kWh	0.44 EUR/kWh
Slovenia	2.07	45.8	79.4 TWh	57.5 TWh	0.58 EUR/kWh	0.8 EUR/kWh
Slovakia	5.44	89.6	198 TWh	115 TWh	0.45 EUR/kWh	0.78 EUR/kWh
Spain	46.7	1200	1520 TWh	954 TWh	0.79 EUR/kWh	1.26 EUR/kWh
Sweden	10.1	471	590 TWh	370 TWh	0.8 EUR/kWh	1.27 EUR/kWh
Turkey	80.8	656	1720 TWh	1150 TWh	0.38 EUR/kWh	0.57 EUR/kWh
United Kingdom	66.3	2420	2150 TWh	1420 TWh	1.13 EUR/kWh	1.71 EUR/kWh