Given that climate change is occurring and that it results from anthropogenic greenhouse gas emissions, international focus must now shift to finding ways to successfully mitigate the growing problem. Since the industrial revolution, the world has used roughly half of its carbon dioxide budget, which is defined as the total amount of carbon dioxide that can be released into the atmosphere such that global mean temperature rises (from pre-industrial reference) do not exceed two degrees Celsius. However, because carbon dioxide emission rates continue to grow, the timescale associated with the burning of this second half of the budget is considerably less than the one of the first half (1850-2010, or roughly 160 years). The image below presents a distortion of the world map which displays country size proportional to carbon dioxide emissions:

It is evident that there exist clear major players (US, EU, China) whose continued increasing carbon emissions could effectively negate any attempts at mitigation by the smaller contributors. Because policy that singles out agents of climate change is unlikely to be popular amongst the accused, a more comprehensive global measure that reflects both the obvious inequality on the one hand and the politics on the other is necessary to make any progress on the climate issue.

When it comes to carbon policy, the carbon market (cap and trade scheme) often emerges as the popular option. While it certainly has its benefits, it is also certainly not without its flaws (I will save these for a later post). The popularity of the carbon market strategy owes much of its success to the aversion towards the carbon tax, which tends to be largely misunderstood. The most important of these misconceptions include the following:

1. The carbon tax and the carbon market are mutually exclusive.
2. The purpose of a carbon tax is to raise funds.
3. Taxation is evil.

When in reality:

1. The carbon tax and carbon market can and probably will have to work in concert with each other as countries seek to reel in their carbon spending.
2. The purpose of a carbon tax is to induce a change in behavior.
3. Taxation may be a necessary evil if people can’t shift to a low carbon diet.

Taxes are in theory beautifully simple, but in reality quite complex. In order to end addiction to coal and other fossil fuels (the only truly sustainable energy solution), a carbon tax would need to be introduced at a low level and gradually scaled up. Below are some of the key principles regarding such a measure:

1. The relative price of energy must increase in order to reduce fuel consumption.
2. Defined and transparent policy must increase the price every few years in order to make renewable and sustainable energy forms and CCS economically viable and present the incentive for development in those areas.
3. Subsidies on fossil fuels must be phased out rapidly in favor of more efficient alternatives.
4. The carbon tax can be used on a national level in concert with a carbon market on the international level, for example.
5. The taxation needs to include not only fossil fuels, but also other forms of biomass, which are only carbon neutral with replantation. Carbon dioxide is the same substance regardless of the source.
6. Income from taxes can be allocated to abate climate change, by providing funding to mitigation option research and development or adaptation measures, on a national scale.
7. Emissions from the international air and sea transport constitute five percent of global carbon dioxide emissions – a tax levied on these fuels could provide funds for potential G77 transfers.
8. Governments must produce trajectories for the development of the carbon tax. Dramatic increases in taxation will not gain approval because they place too much stress on lifestyles. Establishing the trajectory is more important than establishing the actual quantity of taxation.
9. The carbon tax may be largely regressive for developed countries, but progressive for developing countries.

The transformation from a high carbon to a low carbon economy economy must be based on strong financial incentives to change the behavior of the world’s citizens, and in particular those that are producing the carbon dioxide. A carbon tax represents one of the ways by which to curb emissions. In order to function as a successful tool in the struggle against climate change, it must however be properly understood and appropriately implemented. It can by no means achieve everything on its own nor should it, but merits at least some consideration as part of a larger diversified portfolio of options.

This entry was posted on Thursday, December 17th, 2009 at 5:55 pm and is filed under Telling your grandchildren you saved polar bears: Priceless, by Yves. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.