Page 150 - 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
footprint per dollar is similar to that of Canada, while the average in the EU is approximately three quarters and in Japan, it is approximately half of the United States level (Hertwich and Peters (2009).47
Table 50 shows, in the first column, the estimates of GHG emissions per average dollar of household expenditures in Japan, the United States and the EU. These three markets account for over two thirds of global banana imports. The second column indicates the effective emission tax rate for an average dollar of expenditure for a USD 30 per tonne of CO2e emission tax. In the case of the United States, a tax that is 3.0 cents per kilo x 1.4 kilos = 4.2 cents per dollar of expenditure, resulting in a tax rate of 4.20 percent. Columns 3, 4 and 5 represent the calculation of the emission tax rate for bananas. (The most recent United States retail price of the banana is USD 1.35 per kilo.)
In terms of Ecuador’s bananas, the carbon footprint is 1.2 kg-CO2e per kilo, calculated to 0.89 kg-C02e per dollar of retail bananas and resulting in a tax rate of 2.67 percent. The last column indicates how the USD 30 emission tax can change the price of bananas, relative to all household expenditure. In the three markets, the relative retail price of bananas drops.
In developed market economies, the demand for bananas is relatively insensitive to price change; the price elasticity of demand is estimated to be approximately -0.4. To simplify the analysis, the assumption is that the value is higher, whereby an elasticity of -0.50 would imply that the quantity in demand decreases by 0.5 percent for every 1 percent increase in price. The relative price decreases in Table 50 indicate that a USD 30 carbon emission tax would increase the demand for bananas by approximately 0.75 percent in North America,
0.68 percent in the EU and 0.26 percent in Japan. The effect is significantly nominal, despite a deliberate overestimation. In other words, the net effect of a USD 30-USD 50 emission tax on the retail demand for bananas would be hard to distinguish from the usual month-to-month variation of prices and sales, despite the usual fluctuations in energy prices, exchange rates and business cycles that influence commodity trading. A global, broad-based emission tax of USD 30, therefore, will likely have little impact on the demand for bananas; it would, instead, slightly increase demand.
Caution should be made when taking into account the estimates derived
above, which were based on aggregate data from diverse sources and on various assumptions. First, the conclusion above that little impact on the demand for bananas is likely to take place is dependent on the assumption of a broad, world-wide emission tax. Under the Kyoto Protocol, developing countries are less committed to reduce emissions (including exemptions, such as in the case of international shipping) than are developed countries. The emission tax on bananas for retail sale, therefore, would only apply to those emissions within the borders of developed countries, primarily through upstream fuel and energy levies. As such, imported bananas will
47 Compared to North America, Japan and the EU are more densely populated, housing units are smaller, and energy prices are higher. Druckman et al. (2011) report a similar pattern of carbon footprint per expenditure category for the United Kingdom. Countries can differ in how expenditures are categorized and measured, and Tukker & Jansen (2006) offer a comparative review of household carbon footprints.
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