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Climate Change Policies: a fresh start

Smart Taxes supports charging for the use of the natural commons which is why we support annual land taxes, amongst the  many good reason for doing so.   We also support charges or taxes for using the atmosphere as a dump which is why we favour Cap/Tax and Share.   Copenhagen has been a disappointment for many but at least the failure has created space for sounder ideas.  Joseph Stiglitz has joined the discussion in Project Syndicate 2010 starting with getting rid of the concept of carbon trading based on ‘Grandfather’ rights to emit.

Underlying the failure in Copenhagen are some deep problems. The Kyoto approach allocated emission rights, which are a valuable asset. If emissions were appropriately restricted, the value of emission rights would be a couple trillion dollars a year – no wonder that there is a squabble over who should get them.

Clearly, the idea that those who emitted more in the past should get more emission rights for the future is unacceptable. The “minimally” fair allocation to the developing countries requires equal emission rights per capita. Most ethical principles would suggest that, if one is distributing what amounts to “money” around the world, one should give more (per capita) to the poor.

So, too, most ethical principles would suggest that those that have polluted more in the past – especially after the problem was recognized in 1992 – should have less right to pollute in the future. But such an allocation would implicitly transfer hundreds of billions of dollars from rich to poor. Given the difficulty of coming up with even $10 billion a year – let alone the $200 billion a year that is needed for mitigation and adaptation – it is wishful thinking to expect an agreement along these lines.

Perhaps it is time to try another approach: a commitment by each country to raise the price of emissions (whether through a carbon tax or emissions caps) to an agreed level, say, $80 per ton. Countries could use the revenues as an alternative to other taxes – it makes much more sense to tax bad things than good things. Developed countries could use some of the revenues generated to fulfill their obligations to help the developing countries in terms of adaptation and to compensate them for maintaining forests, which provide a global public good through carbon sequestration.

We have seen that goodwill alone can get us only so far. We must now conjoin self-interest with good intentions, especially because leaders in some countries (particularly the United States) seem afraid of competition from emerging markets even without any advantage they might receive from not having to pay for carbon emissions . A system of border taxes – imposed on imports from countries where firms do not have to pay appropriately for carbon emissions – would level the playing field and provide economic and political incentives for countries to adopt a carbon tax or emission caps. That, in turn, would provide economic incentives for firms to reduce their emissions.

Time is of the essence. While the world dawdles, greenhouse gases are building up in the atmosphere, and the likelihood that the world will meet even the agreed-upon target of limiting global warming to two degrees Celsius is diminishing. We have given the Kyoto approach, based on emission rights, more than a fair chance. Given the fundamental problems underlying it, Copenhagen’s failure should not be a surprise. At the very least, it is worth giving the alternative a chance.  (link to article)

Copyright: Project Syndicate, 2010.

Posted in Land Taxation, News.

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