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CLIMATE CHANGE: Doors Opening for Carbon Tax

Julio Godoy* - Tierramérica

BERLIN, Dec 30 2009 (IPS) - With the chance for a global climate change treaty on hold, a tax on greenhouse gases could be an effective alternative for discouraging the activities that create emissions, say economists and environmentalists.

Revenues generated by the tax could then be made available to developing countries to finance the technological leap necessary to modernise their economies while also reducing emissions of greenhouse-effect gases.

Economists, environmentalists, international organisations and even some European government are in favour of the idea.

One such enthusiast is economist Dennis Snower, president of the Institute for the World Economy, of Germany’s Kiel University, located some 300 kilometres west of Berlin.

“The climate consequences of carbon dioxide emissions are equal around the world, independent of where the gas was emitted,” Snower told Tierramérica.

“As such, each emitter should pay the same rate per tonne of carbon, regardless of whether it is from an industrialised or developing country, or the quantity of CO2 emitted in the past,” he said.

According to Snower, the CO2 tax should replace the system of transferable emissions permits, which, he says, suffer two weaknesses: the permits are granted free of cost and in huge quantities by governments in the rich world to domestic industries. In general, economists consider taxes a tool that governments can use to influence the behaviour of their citizens and to guide consumption patterns, discouraging products considered harmful to the individual or the community, or encouraging healthy alternatives.

Richard Tol, an environmental economist who teaches at several European universities, also supports a tax on carbon emissions, saying it should be a global measure against climate change, starting at a low initial rate, and gradually increasing over time.

Like Snower, Tol criticises the system of transferable emissions permits. He believes the system could work if the rights were auctioned off instead of distributed free of cost, as is the case currently in Europe.

The carbon tax is already becoming a reality in some parts of Europe. On Dec. 10, the Irish government introduced a tax on the consumption of, initially, petroleum and diesel. Beginning May 1, 2010, the tax of 15 euros (22.5 dollars) per tonne of CO2 emitted will be applied also to heating fuel and gas.

Brian Lenihan, Ireland’s finance minister, said the tax is a demonstration of Ireland’s real interest in reducing greenhouse gas emissions.

France will enact a similar tax on Jan. 1, 2010, as President Nicolas Sarkozy announced in September. “The tax, at a rate of 17 euros (24.35 dollars) per tonne of emissions, will be applied to industries as well as households,” the president said in a speech at the time.

Sarkozy explained that the value of the tax is equal to the average price per tonne of CO2 on the European carbon market, in operation since 2008.

Former French prime minister Michel Rocard (1988-1991), who in early 2009 headed the commission that proposed the introduction of the carbon tax, told Tierramérica that the “purpose is to penalise some polluting behaviours that fuel global warming, like the consumption of fossil fuels.”

Multilateral institutions, like the International Labour Organisation, support a global tax on CO2. In a report published Dec. 11, the ILO estimated that the tax would lead to the creation of some 14 million jobs by 2014.

The ILO suggests a tax similar to those of France and Ireland. The report “Green Policies and Jobs: A Double Dividend?” also calculates that some 600 million workers around the world, representing about 40 percent of all jobs, currently work in sectors with high CO2 emissions.

However, some economists and the governments of emerging nations like China see the tax as counterproductive. Beijing believes it ignores the different responsibilities of industrialised countries and developing countries in terms of how much they have contributed to global warming.

Ottmar Edenhofer, a professor at the Technical University of Berlin, says the CO2 tax would “motivate the petroleum or carbon producing countries to accelerate extraction of those fuels and would increase emissions. The system of transferable emissions permits is preferable because it allows immediate control of national emissions budgets,” he told Tierramérica.

But the emissions rights – in practice, permits to pollute – need to overcome two obstacles: first, the international community should adopt a binding system of allocation, whether based on the size of the population, which would favour developing countries, or according to economic yields, which would benefit industrialised nations. The second is that the market itself should be global.

In any case, said Edenhofer, the urgency of climate change demands an immediate solution.

“The global budget of greenhouse-effect emissions in the current century must not surpass 830 gigatonnes of CO2 if we are not to go beyond the maximum temperature rise of two degrees C,” he said.

“In the last decade, humanity produced 270 gigatonnes. At that pace, the world will have exhausted its budget in less than 30 years,” warned the expert.

(*This story was originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme, United Nations Environment Programme and the World Bank.)