Tag: Carbon tax

Counting on … day 83

10th April 2024

Carbon Tax – 3

Carbon emissions may be produced outside the country where the final product is consumed. This could be a way of avoiding paying a carbon tax by shifting the emission-producing part of the business elsewhere, or it could equally be a way for a foreign importer to achieve a price advantage over indigenous producers. A good carbon tax needs to be aware of these for means of tax evasion.

The Europe Union is phasing in such a tax avoidance mechanism – it will be 100% in place by 2026.

“The EU’s Carbon Border Adjustment Mechanism (CBAM) is the EU’s tool to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries. By confirming that a price has been paid for the embedded carbon emissions generated in the production of certain goods imported into the EU, the CBAM will ensure the carbon price of imports is equivalent to the carbon price of domestic production, and that the EU’s climate objectives are not undermined. The CBAM is designed to be compatible with WTO-rules.” https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en

Just as  domestic carbon taxes can disproportionately affect the poor, so carbon taxes can disproportionately affect poor, less developed countries. Wealthy countries can afford to invest in, for example, electric arc furnaces for producing green steel, or in wind farms to generate green electricity, but poorer countries may struggle to invest to the same degree leaving them stuck with using carbon producing industrial processes and therefore subject to more taxation! Just as poorer households need to be supported with subsidies and grants to  enable them to shift to greener lifestyles, so poorer countries need to be supported with subsidies and grants from the wealthier nations, to enable them  to shift to to greener infrastructures.

Counting on … day 82

9th April 2024

Carbon Tax – 2

Carbon taxes are often criticised for impacting most on the poorest or the most vulnerable. People and businesses with wealth can more easily buy their way out of the situation either by absorbing the tax or through buying alternative products and services that avoid the tax. For example a richer person can more readily buy a new efficient electric car, where someone with less wealth may have to pay more on petrol to continue using their older car. A richer person can more readily afford a heat pump (powered by renewable electricity) and home insulation, whilst a less wealthy person – or someone who is rented accommodation- will have to pay more for running an existing gas boiler in an un-insulated home. 

Such issues need to be addressed. Improving public transport, implementing scrappage schemes for old cars and boilers, offering grants for insulation and heat pump installations – including for rented accommodation – are key. At the same time introducing a carbon tax incrementally over time to ensure users can plan and adapt, is also important. 

Given the urgency of the need to reduce greenhouse gas emissions to address the climate crisis, maintaining the status quo is not a good option. It is certainly not a good option for the poorest or most vulnerable as they are the ones who are – and will be – most affected by the impacts of the crisis.

Counting on … day 81

8th April 2024

Carbon Tax -1

“A carbon tax is a tax levied on the carbon emissions from producing goods and services. Carbon taxes are intended to make visible the hidden social costs of carbon emissions. They are designed to reduce greenhouse gas emissions by essentially increasing the price of fossil fuels. This both decreases demand for goods and services that produce high emissions and incentivises making them less carbon-intensive.” https://en.wikipedia.org/wiki/Carbon_tax

Many definitions of a carbon tax say it is designed to address the social cost of carbon emissions which is interesting. There is certainly a social cost in terms of threats to the stability of social systems, but the carbon tax (surely?) should aim to tackled those threats -physical ones arising from adverse weather and rising sea levels, and economic ones rising from the adverse affects of climate change on growing crops, ensuring a healthy work force and protecting commercial buildings from damage. 

The aim of a carbon tax should be to reduce and ultimately curtail the use of fossil fuels, whilst at the same time encouraging the development and use of alternative renewable energy. There will be a transition period as rapid changes cannot be made overnight. 

For example, to make transport systems free of fossil fuels, needs the development and delivery of sufficient electric vehicles, associated charging points and a proportionate increase in renewable energy supplies. It might also need to develop a wider spread, more frequent and affordable public transport system as a means of making best use of the resources needed to make both vehicles and batteries. A carbon tax would be too blunt an instrument to achieve all these changes unless supported by  legislation outlining the changes needed, and by grants and subsides to enable smaller and more vulnerable businesses and customers to make the transition.