Applicability of a carbon tax system in the apparel industry in Sri Lanka

Abstract

Global warming and subsequent climate change have been identified as critical global issues which need urgent and close attention. Nevertheless, addressing this has become a problem due to the direct relationship between development and greenhouse gas (GHG) emissions. However, with the introduction of Paris agreement, countries are trying to reduce GHG emission by using various emission reduction policy instruments. Price based emission reduction instruments are deemed to be effective in achieving emission reductions, as they induce emission reductions through price signals, and also generate revenues which can later be used. Carbon tax systems and emission trading schemes are identified ax the most popular pricing instruments. However, implementation of carbon pricing instruments in not that common seen. Hence, this research focuses on identifying the applicability of carbon pricing instruments to reduce GHG emissions in apparel sector, which is also a highly energy intensive sector in Sri Lanka Data collection was done through semi- structured interviews and questionnaires. Data collected through questionnaire survey was analysed using Fuzzy Extended Analytic Hierarchy Process (FEAHP), while data collected through interviews were analysed through content analysis. A preliminary survey w dene to validate literature findings, which was used in the questionnaire. Questionnaire survey was conducted to evaluate the response of apparel firms to carbon pricing instruments. When evaluating the response of firms, the importance given by firms to decision alternatives was analysed using FEAHP. Accordingly, investing in new technologies was found as the most important decision alternative for apparel firms with an importance weight of 0.24, while shifting cost to customers was found as the decision alternative with lowest importance with a weight of 0.17. From the expert interviews, it was found that the carbon pricing revenue should be used to programmes which targets emission reductions. Further, the expert interviews revealed that there could be barriers at organisation level, sector level and national level when implementing a carbon pricing instrument. Hence, it was found that the necessary steps should be taken at all those three levels to overcome the barriers and implement a lasting carbon pricing instrument which is capable of achieving emission reductions.