Environment, GS-3

A case for a differential global carbon tax

Introduction

  • Climate change is a global problem, and a global problem needs a global solution. The most recent Intergovernmental Panel on Climate Change (IPCC) report suggests that we, as humankind, might have just over a decade left to limit global warming.
  • The IPCC says total global emissions will need to fall by 45% from 2010 levels by 2030 and reach net zero by 2050.
  • If these targets are not met, tropical regions of the world, which are densely populated and happen to be mainly concentrated in the global South, are likely to be most negatively affected because of their low altitudes and pre-existing high temperatures.
  • Some impact of this was already felt during the Tamil Nadu water crisis this year.

The Global North has previously added to climate injustice

  • The Global South, which has historically contributed less to the problem (and even at present its per capita carbon emissions are much smaller in comparison to the countries in the Global North), happens to be at the receiving end of the lifestyle choices made by the global North.
  • Although time is running out, a genuine global consensus on the mitigation of this problem is unfortunately missing. In the absence of a collective agreement, the environment is becoming the casualty.
  • The bottom line is that both the worlds need to contribute to avert this danger in their self-interest.
  • At the same time, the burden of adjustment cannot be equal when the underlying relationship between the two worlds has been historically unequal. But what is the correct balance in terms of sharing this burden, something which can be politically and juridically just?

Correcting injustice

How can this injustice be corrected while making the planet a better place to live in for future generations?

  • The first priority is to fundamentally change the energy infrastructure, which requires massive investments for the green energy programme across the world.
    • Developed and advanced countries apart from funding their own energy transition, partially support the transition for the countries at the bottom and this sharing of the burden of development be done in a way which inverts climate injustice
  • Who subsidises whom and by how much? Those countries which emit more than the global per capita average pay for their own transition plus fund a part of the energy transition of those who are below this average.
    • So, those at the receiving end of climate injustice are duly compensated for even as the entire world transitions to greener earth as a result of this process of carbon tax sharing.
    • Currently, the global average of carbon emissions is 4.97 metric tonne per capita. All the countries with emissions above this level (68 in all) are “payers” to finance energy transition for ‘beneficiary’ countries (135 in number), which are emitting below this level.

Carbon Compensation

  • The total amount of “carbon compensation” made by the Payer Nations comes to around $570 billion. The distribution of this amount across the payer countries is based on their distance from the global average (controlled for their population size).
  • The other side of the same coin is the Compensated Countries, and the distribution of this fund across them is also based on how lower their emissions are in comparison to the global average.
  • Once you add (subtract) the carbon compensation amount to (from) each of the countries, you get the effective carbon tax for them.

Top payer Countries

  • The two top ‘payer’ countries in terms of absolute amounts of transfers are the S. and China since their emissions are higher than the global average.
  • What’s interesting is that despite being a payer country, the effective tax rate for the Chinese is lower than the possible universal tax rate of $46.1 per metric tonne and that’s because their own energy transition (1.5% of China’s GDP) plus the global compensation they make requires a tax rate only of $34.4 per metric tonne.
  • So, in that sense, the burden of adjustment is only partially falling on their shoulder and only because they emit more than the global average.

Conclusion 

  • In terms of ‘compensated’ countries, India comes at the top due to its population size and its distance from the global emissions’ average (India has per capita emissions of 1.73 metric tonne).
  • The other suspects are all countries from the global South, but this list springs a few surprises like France, Sweden, and Switzerland.
  • What this tells us is that even high-income countries which have currently kept their per capita emissions low are beneficiaries of this globally-just policy.
  • With China in the first list and some of the first world countries in the second, all nations will have to climb down the emissions ladder without necessarily having to give up on their standard of living.

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