Introduction: A Case For a Differential Global Carbon Tax

  • 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 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 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.
Finding a just approach
  • The global South has historically contributed less to the problem and even at present it's per capita carbon emissions are much smaller in comparison to the countries in the global North
  • A just approach would involve a global sharing of responsibility among countries according to their respective shares in global emissions. 
  • Currently, the most accepted model of mitigation has been the carbon trading process. However, it is not just an energy transition.
  • A Just Energy Transition (JET) is premised on a sense of global justice in terms of climatic fallouts and the respective contributions of the countries.
  • It will also help the resource-poor developing countries to make the energy transition without having to worry about finances.
A differential global carbon tax the relationship between level of income
  • Those on the top of the funnel i.e having both high income and high global emissions must partially support the transition for the countries at the bottom apart from funding their own energy transition.
  • This sharing of the burden of development must be done in a way which inverts this injustice funnel. 
  • For a successful energy transition to greener renewable sources, countries have to spend around 1.5% of their GDP which must be financed through a system of the global carbon tax. 
  • Since the total global carbon emissions are 36.1 billion metric tonnes of CO2, this amounts to a global carbon tax of $46.1 per metric tonne.
What is the Carbon Tax?
  • A carbon tax is a fee imposed on the burning of carbon-based fuels (coal, oil, gas).
  • It is the core policy for reducing and eventually eliminating the use of fossil fuels whose combustion is destabilizing and destroying our climate.
  • A carbon tax is a way to have users of carbon fuels pay for the climate damage caused by releasing carbon dioxide into the atmosphere. 
Does India have a Carbon Tax?
  • India does not have a de jure Carbon tax, there has been a de facto carbon tax. 
  • In 2010, the government had launched the National Clean Energy Fund (NCEF) whereby it imposed a clean energy cess on coal produced in India as well as imported coal @ Rs.50 per tonne. This is one example of de facto Carbon Tax.
  • By 2016, this amount was scaled up to Rs 400. 
  • Proceeds from this tax would go to the National Clean Energy and Environment Fund, to be used for “funding research and innovative projects in clean energy technologies”.
  • When the Goods and Services Tax Compensation Cess was introduced, the Clean Energy Cess along with 12 others were abolished and effectively subsumed by it. 
  • This was followed by the transfer of funds accumulated by the abolished cess to the Consolidated Fund of India, from which most government expenditure is made.
   How will the differential Carbon tax work?
  • Those countries which emit more than the global per capita average must pay for their own transition plus fund a part of the energy transition of those who are below this average. 
  • 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.
  • 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 must be based on their distance from the global average (controlled for their population size). 
  • For the compensated countries the distribution of this fund must also be 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.
  • The two top ‘payer’ countries in terms of absolute amounts of transfers are the U.S. and China since their emissions are higher than the global average. 
  • In terms of ‘compensated’ countries, India comes at the top due to its population size and its distance from the global emissions’ average as India has per capita emissions of 1.73 metric tonne only.
  • The differential Global Carbon Tax is a just energy transition approach which wants all nations to climb down the emissions ladder without necessarily having to give up on their standard of living.
  • It is a global green Robin Hood tax.
Read More: The Four Big Climate Challenges For India  |  Global Problem, Local Solutions  | Chandrayaan-2