Page 146 - Ecuador's Banana Sector under Climate Change

ECUADOR’S BANANA SECTOR UNDER CLIMATE CHANGE: AN ECONOMIC AND BIOPHYSICAL ASSESSMENT TO PROMOTE A SUSTAINABLE AND CLIMATE-COMPATIBLE STRATEGY
1. Introduction
This chapter examines how the adoption of climate change policies will likely
inufl ence the banana sector in Ecuador. While the direct and indirect effects of climate change policies on the demand for bananas and on the international banana supply chain are still unknown, there are an unlimited number of possible policy combinations that can be considered. This chapter, therefore, poses the question of how the supply and distribution of bananas could change if the world were to adopt a xfi ed GHG emission tax. While it may be purely hypothetical, since this is unlikely to occur, it is nevertheless evident that more and more countries are adopting some in-depth and broader policies to reduce GHG emissions. This analysis will provide information on the direction this change could take, while distinguishing between the important and relatively unimportant aspects.
The global GHG mitigation policy that is assumed in this analysis is a single world-wide tax on all GHG emissions, applied as broadly and as upstream as possible. It assumes that most of the revenue is refunded to households and businesses, so that incomes and revenues, respectively, do not decline on average because of an emission tax. These hypotheses will provide a starting point to the debate on the extent to which the production and distribution of bananas could change if broader policies to reduce GHG emissions were in place.
The study begins with the value that such a tax could have on the banana
(Section 2). It then examines how an emission tax would alter the demand
for bananas in the markets of developed countries (Section 2.1). Finally, an examination is made of the banana supply chain for points where GHG emission abatement may occur and the potential for structural change in terms of the logistics of the banana sector. This is done by reviewing transportation and distribution methods (Section 4) along the supply chain and, subsequently, the growing of bananas (Section 5) and the policies to reduce on-farm emissions.
2. The social cost of carbon dioxide
The ideal tax rate on emissions should come close to the marginal benefit of reducing the GHG emissions. This can be approximated by the social cost of CO2 (SSC), for which there is a range of estimates. The SSC is the long-term cost to the world economy of an additional unit of CO2 emissions. The carbon
tax that is currently applied or proposed is approximately USD30 per tonne of CO2e. The Province of British Columbia, Canada, charges Can$30 per tonne of CO2e emissions for all types of fuel (Ministry of Finance, 2013); the EU proposes to harmonize Member States’ fuel tax rates to at least €20 per tonne of C2O emissions (European Commission, 2013); and the United States Congress has drafted a legislation for a charge of between USD25 and USD35 per tonne of CO2e emissions (United States House of Representatives, 2013; and Fieldhouse and Theiss, 2013)4.3
43 For carbon prices in other national and subnational schemes, see Kossoy et al. (2013). 130
industry, particularly in Ecuador, based on estimates of the social cost of CO 2