Economists say a global carbon tax would efficiently shift the world to safer energy production. So why is it barely mentioned, ask Ian Lefond and Timmons Roberts of Brown University? Article courtesy of Climate Home News.
At the World Economic Forum in Davos this week, the world’s economic elite will make much of the climate crisis and their desire to green global capitalism; yet one of the most powerful economic tools available will barely be mentioned.
In an influential 2017 proposal, the Carbon Pricing Leadership Coalition, led by Nobel-laureate Joseph Stiglitz and former World Bank chief economist Nicholas Stern, put forward a globally coordinated carbon tax as the best policy to address climate change.
Oil producers fear such taxation, and often unleash strong political campaigns to stop it
The basic idea of carbon taxation is that the costs of carbon emissions would be added onto the cost of a gallon of gas, or a BTU of heating gas, or a kilowatt hour of electricity. Currently fossil fuels receive huge subsidies, especially as their costs don’t include the health impacts, ecological damage, acid rain, and most ominously, the trillions of euros in damage from rising seas, droughts and storms that are expected.
Most economists agree: raising the price of fossil fuels and lowering the relative cost of renewables would efficiently shift consumption and investment towards low carbon of energy more cost-effectively than other policies. If carbon taxes are as appealing as these economists say, then why is this so hard?
First, developing countries have argued that they did not create the problem of climate change, so such a tax should fall on those who did – the wealthy countries of the world. In turn, in some wealthy nations it is impossible to propose different burdens that could put them at a competitive disadvantage.
This was expressly resolved by the US Senate in 1998 with the Byrd-Hagel Resolution, which said that the US should not enter into any binding treaty on emissions reductions that didn’t place similar limits on India and China.
Second and even more fundamentally, many nations bristle at the idea of any globally-imposed initiative – they fear loss of sovereignty and control over their national economic policy.
Carbon taxes have the potential to raise massive amounts of revenue. But often there’s disagreement regarding the uses of that income
Back in 2010, a “high-level panel” led by former British prime minister Gordon Brown investigated financing options to deliver “scaled -up, new and additional, predictable and adequate” climate finance. They considered carbon taxes of several sorts, including airline levies and those on international shipping (bunker fuels).
A group of justice-focused NGOs have been putting forward proposals for these kinds of international financing mechanisms to meet the huge “finance gap” that exists each year between what is believed is necessary to address climate impacts in developing countries and for greening their energy sources.
The report wrote off nearly all approaches as politically unfeasible. In particular, airlines and the shipping industry have resisted taxation, as we saw when the EU attempted to institute a levy on airline passengers. Oil producers fear such taxation, and often unleash strong political campaigns to stop it.
Globally there are highly different levels of appetite or tolerance for this kind of taxation, meaning that it would be difficult to establish a common price.
There’s another problem. Carbon taxes have the potential to raise massive amounts of revenue. But often there’s disagreement regarding the uses of that income. Should other taxes, including to corporations, be cut by an equal amount? Should the money be reinvested into climate projects? Or should the funds be rebated to citizens and companies? Some carbon tax bills have failed over these disagreements. Hybrid bills are a potential way forward on revenue allocation.
Finally, there’s another form of pricing carbon that is not a tax. Cap and trade systems involve auctioning off permits to pollute, so that those companies which can more easily reduce their footprint will do so first, and make a nice profit. Would a global cap and trade system, based say on the global carbon budget as its cap, be more effective and palatable?
Subnational units are trying to initiate carbon pricing mechanisms of both of these sorts. Regional units such as the EU are doing the same.
Corporations are also taking up the torch of carbon pricing: over 1200 businesses have implemented internal carbon taxes, and many, including oil companies, are lobbying for their enactment, both on the national and global levels.
The question is whether they have the potential to break through the gridlock that has characterised carbon pricing discussions on the global, national, or even international levels.
Even though the prospects for a globally-uniform carbon tax are vanishingly remote right now, in the future it is possible that haphazard local actions might make the case to large corporations that a consistent rate would facilitate business by levelling the playing field. This could make a globally coordinated carbon tax all the more appealing.
Ian Lefond is a researcher in Brown University’s Climate and Development Lab. Timmons Roberts is professor of Environmental Studies and Sociology at Brown University and co-founder of the CDL.
This article originally appeared on Climate Home News and is republished here under their Creative Commons Licence.
marc hudson says
Very good article. Only thing – Byrd-Hagel was before, not after, the meeting in Kyoto…
Geir Vollsaeter says
Good piece. Adding that its critically important to deploy tools like LCA and cross border analysis to ensure climate efforts dont lead to carbon leakage or worse, increased emsissions. In addition, 10s billions of Euro windfalled by utilities in EU ETS has not been recycled into climate efforts so while taxes are more stable as incentive, it too as the article states, needs to be ensured used towards real reductions. Some examples here https://www.linkedin.com/pulse/critical-need-life-cycle-impact-analysis-climate-geir-vollsaeter/
Rick Maltese says
Trying to impose international rules about energy usage is too closely tied to national defense. The military can’t operate effectively if any kinds of restrictions limit their ability to operate their already expensive military operations.
In addition very wealthy fossil fuel companies pay out large sums to lobby against nuclear energy which is potentially their biggest competitor.
If the general public were more educated nuclear energy would make a comeback but without public awareness and profit motivated corporations that produce oil and natural gas constantly interfering nuclear has little chance of making a comeback.
Nuclear energy is the godsend to solve the climate crisis but greed from corporations as well as fear and ignorance could very well be the flaws in humanity that pushes us to extinction.
Meanwhile we continue to plunder the earth to acquire fossil fuel in the form of oil, coal and natural gas but also plunder it for resources like copper, cobalt, coal (needed for steel and concrete), rare earths that go into building wind turbines and solar panels. Knowing that wind and solar energy will always depend on baseload gas, coal and/or nuclear to come to the rescue theses kinds of conferences are a waste of time. Perhaps they do serve to perpetuate the myth that renewable energy is a long term solution. As long as renewable energy is paired up with fossil fuel back up the long term will come to an abrupt ending when supplies of gas, coal and oil run out. With no nuclear energy left the world will be in a serious energy crisis.