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The climate solution no-one in Davos will be talking about

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Climate Change News

Economists say a global carbon tax would efficiently shift the world to safer energy production. So why is it barely mentioned?

Delegates to the World Economic Forum are arriving in Davos, Switzerland for the event, which starts on Tuesday

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.

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 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.

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 them.

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.

Source: Climate Change News. Reproduced with permission.  

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  • Joe

    We had our chance with ‘Carbon Pricing’ first when Rudd ran away from his CPRS and then with Labor’s ETS which The COALition repealed after winning the 2013 election. The shame with the ETS repeal was that the ETS was actually working to reduce our emissions. Every year since the ETS was repealed our emissions have increased DESPITE what Two Tongues Turnbull said at his presser in Cairns yesterday (22/1/18) to announce his latest measures to save ‘Our Reef’. But perhaps the agent of change for Carbon Pricing will be China that is introducing it’s own ‘National Carbon Tax’. It is hard to imagine that China will just sit back and allow imports from countries that do not have some form of Carbon Pricing. To level the playing field China should slap on a Carbon Tariff to goods coming from countries without Carbon Pricing. Australia will initially squeal but the solution is available.

    • Megs

      Dead right Joe. Especially about China ( or anyone) being abe to slap on a tax on any imports from non tax countries. If any of the very large trading countries begins the process everyone will have to follow. See my post re CCL.

      • Joe

        Thanks for the link to CCL. ‘Political Will’…I love that expression, it is indeed something that we very rarely see these days in Aussie politik. If only we had a Leader with the political will of ‘The Great Man’, Gough Whitlam. With Gough it was only one way… “Crash Through or Crash” as he himself said. Yes, there were Crashes but they were more than outweighed by the Crash Throughs many of which we benefit from today. But back to climate change and the question of who amongst our current crop of pollies has the political will to do what has to be done…..close the door to FF Lobby groups and get on with stopping FF usage. We have no more time to waste with “slow transition”. We need “fast cessation”. Who is going to step up?

  • Megs

    For goodness sake !! Would it hurt to go to the source ?
    The respected Dr James Hansen who sort of kicked off the big debate from his role as a planetary atmospheres physicist at NASA wrote the definitive book on it called Storms of my Grandchildren and in it he proposed that people don’t trust governments with a tax and they don’t trust Wall St to trade credits, so just impose a FEE on carbon emissions, collect it onto a trust and distribute ALL of it ( except maybe 0.5% admin) equally to all citizens. It is called Fee and Dividend.
    Have a look at https://citizensclimatelobby.org/
    Start in the USA. Apply “border adjustments” so that any product or service coming in to USA from a non carbon fee country has to pay a USA carbon fee. Pretty soon everyone will choose to collect it rather than let the USA do so. The whole argument is laid out by Citizens Climate Lobby. it is very well researched and modeled by independent economic consultants. It is also adopted as policy by 350.org.

    CCL is huge in USA and we now have an active branch in Australia with a lot of lobbying under the belt already. Volunteers are being skillfully trained in high level best practice lobbying methods and working as teams and having a hell of a good time as well. The aim is to respectfully educate and get onside the conservatives as well as the progressives, not by head butting or confronting argument but in civilised exchange of information that leaves the door wide open for further work.

    USA CCL have got something going forming pairs of congresspersons , one each from Republican and Democrats and there are now over 60 and growing.
    Just get with the program that is working already. Study it well before dismissing or arguing.

    • MaxG

      Thanks for posting; looks like something worthwhile doing…